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 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 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.


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

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?

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. 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). 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).

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, 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.

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: “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:

“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? In Germany a buyer is protected by the service of a 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 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 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.



Walking the plank 

Declan Purcell in “A Rough Guide to Irish Regulators” writes:

“After considering lots of alternatives, we eventually defined a regulatory body
as one that has statutory recognition, and has functions in at least two of the
following three areas of activities:

1. The formulation of goals, the making of rules, [and/or] the setting of

2. Monitoring, gathering information, scrutiny, inspection, audit and

3. Enforcement, modifying behaviour, applying rewards and sanctions.

In addition to its regulatory role, to qualify for inclusion a regulatory body
also had to have the following features:

  •  It is an independent organisation, separate from any other body
  •  It has some capacity for autonomous decision-making
  •  There is some expectation of continuity over time
  •  It has some personnel and financial resources.”

There is a thin line to be drawn between political appointees without power or expertise and individuals and organisations with a clearly defined mandate and set of deliverable expectations for which they in turn are made accountable.

Political appointees so-called ‘representatives of the public interest’ did not serve us well as members of the boards of banks. ‘Regulators’ political appointees to various boards and agencies in the state with little or no knowledge or expertise in the field of operation of the agencies in which they operate signal corrupt state involvement rather than regulation.

If loose regulation fails eg in the financial sector, it needs to be abandoned and replaced with effective regulation.

Consideration should be given to the franchising in the private sector of effective regulatory bodies with clear and distinct terms of reference. Liaison with the academic and university sector should be considered to further refine the effectiveness of regulatory bodies. If targets are not met, such organisations should be replaced.

There are in excess of 250 regulatory agencies in Ireland and there is a clear need to monitor the monitors.

Central Statistics Office and the ESRI

The CSO instead of shining light on the Irish economy has instead taken on the role of wish fulfillment and propaganda as it muddies the waters. However, In some areas it provides a useful and effective service eg in provision of national census, but its tool base is blunt.

CSO could do with an overhaul to make its procedures more effective and useful. When useful empirical data is obscured and becomes a propaganda tool, time for change has arrived. It also along with many other agencies of the state, is a victim of austerity.

A misleading propaganda tool used by the Central Statistics Office is the notion of percentage growth:

“Irish Economy 2013:  The CSO said today that preliminary estimates for the third quarter of 2013 indicate that GDP (gross domestic product) increased by 1.5% in volume terms on a seasonally adjusted basis compared with the second quarter of this year while GNP increased by 1.6% over the same period.”

Let’s leave out the mumbo jumbo of ‘seasonally adjusted’ which is not defined but added in there to cover all bets if the figures are wrong, which they are.

The figure will be seized upon by every hooray Henry in town to beat the drum of ‘turning the corner’, ‘the tiger is back’.

The final quarter of 2013 showed a decline of -2.3% and according to official figures the overall decline for the year was -0.48%.

It’s not without coincidence the budget is about that time of the year to benefit most from the misleading 1.5%.

Slicing figures into seasonal and quarterly figures allows for false information disguising underlying trends. Such figures need the accompaniment of real annual figures and charts for a 5 year period or more to show in real terms the real underlying trends upon which percentile calculation is abstracted.

Certain methodology used by the CSO tends to obscure and distort the information upon which data is based. One method is the presentation of accumulated data based on percentage change. Becoming more popular representation of data in this form is favoured by stock brokers who bet on it.

If I sell you 6 apples or properties in 2012, 3 apples or properties in 2013, I see how many apples or properties are being sold over the 2 years. Percentile change 50%.

However, charts using ‘Percentage change’ can lead the uninitiated into the territory of propaganda and misleading, incorrect assumptions.

If you cast your eye over a series of absolute figures for GDP over a five year period, its easy enough to absorb the real figures and make a rough guesstimate of decline or growth trends in terms of real figures.

But even the OECD(see later) disguise real figures by giving GDP and GNP in terms of annual per capita values.

It should be obvious to you that if GDP figures are in decline, that decline can be hidden by measuring GDP per capita in a declining population due to emigration.

Its also noticeable that such figures are given in a way that does not account for unemployment patterns or numbers at work.

However, lets say I describe ‘percentage change’ in the sale of apples between 2013 and 2012:

6-3 = 3 divided by 6 and multiplied by 100 or ((6-3)/6) * 100 = 50%

The figures describe a large change relative to the figures used.

But the figures themselves  upon which the changes are based are not given to me, only the change. Percentile change is more a tool of gambling stock brokers on the markets, than a tool of real information.

For example, unless I’m told whether the figures are based on unit apples or millions of apples, or how many there are unemployed or emigrating, percentage change on a sliced up basis of a month or two, can give a false overall assumption.

Dumping percentage change modelling should be done immediately unless clear relationships to more fundamental changes on an annual basis are given with built in error checking based on standard models of standard deviation.

Little accompanies these charts to show the type of modelling done to obtain the results upon which the data rests along with equivalent models of error checking

Real figures that have been subject of standard deviation error checking should be given to the analyst to enable cross checking of data. The analyst could calculate the percentage change quarter for themselves.

For example, analysts need to know the numbers of new mortgages given out in a chart comparing like for like on an annual basis over a five year period, they can do percentile change calculation themselves; they do not need percentile change data without  real underlying figures upon which they are based.

Percentile change modelling leads to propaganda such as recent “30% rise in mortgage lending”. This could represent properties  based on 13 this year against 10 properties selling last year!

CSO GDP percentage change figures often disguise falling GDP in Ireland leading to false assumptions on a return to growth.

Falling GDP overturns figures predicating debt sustainability and growth and our ability to repay our ‘bailout’.

Growth rates of in excess of 2-3% are used by the ESRI  to model Ireland’s recovery.

It would be helpful if the Irish Central Statistics office had a page with an Irish debt meter with repayment schedules for various bond due dates, analysis of percentage change, percentage of GDP/GNP and comparisons of debt repayments vs budget expenditure from various departments eg health/education.

NAFIG1It doesn’t.

It would  be helpful if some external agency took a critical look at its procedures and processes over the past decade to assess its fit for purpose for  data accumulation assisting in policy formation.

Accumulation of data on employment/unemployment, number of businesses opening/closing, emigration patterns, rising/decreasing levels of taxes and charges, demographics of population changes, statistical and comparitive trans national data on our debt burden would  help as well and represent a considerable resource for policy makers to consider.

But information from CSO is frugal limited in the main to a national census instead of, for example, interrogatory methods for eliciting spending requirements in various government departments:

The CSO however seem complacent enough with the job they are doing, provide no information on ‘what new demands for statistics’ they mention below.

In fact it looks like there will be a culling of their work in “the identification at EU level of statistics which are no longer needed”

“Statistics: Information for Ireland – CSO’s Key Priorities 2012-2014

Goal 1 Meet Statistical Needs

The actions under this goal aim to deliver our existing core annual statistical
programme; and, wherever possible, improve timeliness and quality, and meet new
demands for statistics. We will continue to review the core programme and contribute
to the identification at EU level of statistics which are no longer needed.”

I’m sure the Irish CSO would argue its a victim of austerity itself. It might even argue it has been somewhat made redundant by our membership of the OECD.

OECD provide a statistical profile of Ireland here:

“Country statistical profile: Ireland 2013″

Latest figures for 2012, Inflation is down to 1.7% and declining. Not good for a growing debt burden that won’t be inflated away. Declining GDP put a lie to the required growth rates of 3%+ to make our debt burden in excess of 120% debt to GDP, manageable.

The figures in the above table(link above) come close to giving you the real GDP but then obscure the data by instead giving GDP and GNP per capita.

Household disposable income annual growth has declined from 8.2% in 2005 to -3.9% in 2011 no doubt because of austerity, increasing taxes/charges, accompanied by a reduction in state services across the board. Curiously, the figures are not given for 2012.

Real GDP growth is flatlining at 0.2% following declines of -2.2% in 2008, -6.4% in 2009, -1.1% in 2010 and 2.2% in 2011. Public and private expenditure in health for 2012 is not given at all, but private expenditure on health is growing as people, clients and practitioners flee from  health service cutbacks.

Total tax revenue is another omission in the table along with others.

OECD has usurped what should be the function of the IRISH CSO in giving these figures. We do not get comparison charts for Ireland vs other OECD states. But you can dig out the profiles of other countries from their OECD charts.

If we want a look at the effect of the banking bailouts on general government debt, a useful publication is Fitzgerald and Kearney’s 2011 research in 2011(a). But beware how the approx €30bn sent to NAMA is hidden in a SPV and not given as part of general government debt.

Note especially the approx €30bn + of taxpayers money sent to bailout the bondholders of the odious Anglo Irish Bank. Note especially the failure of the present FG/LB government to negotiate a write down of Anglo debt settled by way of promissory notes recoined into new commercial obligations by way of long term bonds.

The marginal write downs and repersuasion of promissory notes into long term bonds is tauted as success by Irish negotiators. In reality, this was a grab and go exercise of the troika in the face of a just demand of full writedown of this debt foisted under false pretenses upon Irish tax payers.

We have yet through a full banking inquiry to get full disclosure on the project that led to failure to have senior bondholders of the banks including Anglo, written down. Negotiations on the promissory notes added to the failure.


The €30bn+ sent to NAMA is cloaked away and hidden from scrutiny by the Irish Freedom of Information Act.

Nobel prize winning economists such as Joseph Stiglitz warned that NAMA was squandering public money At the time of its setting up proponents argued for it to succeed, annual growth rates in the order of 3%+ were required.

NAMA can selectively manage its portfolio to use the good bits to hide the bad.

Similar growth predictions of 3%+ were used to vindicate the belief the Irish economy could survive its bailout.

It appears annual growth rates at these rates are not being met.

Quarterly statistics based on percentage change modelling do not give a true picture of the real decline facing the Irish economy over the past number of years and its decline going forward into the future.

With declining GDP the outlook for the economy under austerity is not looking good.

It was essential for europhiles to give a good news story to restore confidence in the Irish economy’s

NAFIG1ability to survive and thrive under its self imposed regime of odious debt and bailout.

Central Statistics Office to the rescue.

From last blog:

“Writing in the Sunday Independent 2 March 2014 P26, Colm McCarthy made the interesting observation that employment statistics quoted ad nauseam by members of the coalition in support of an employment turnaround in the Irish economy, are suspect. The CSO on this blog has been questioned before as to its role as propaganda arm of the state rather than true pursuit of objective and scientific analysis of data.

“The CSO conducts a quarterly household survey which provides the most comprehensive picture of trends in the labour market. Unfortunately, the figures for employment in agriculture have been distorted by methodology changes and they are making the overall picture look better than it really is. Over the last two years total employment has grown by just under 60000. But 37000 of this increase is supposed to have occurred in farming. Farm output has changed little over that period but on-farm employment appears to have grown by no less than 46%. Non farm employment has performed as indicated in the accompanying table below.”

I’m unaware of a massive increase in employment in the agriculture/farming sector. CSO figures showing a growth in GNP are also suspect.

GDP is set to decline further due to the ‘end of patents’ pharma scenario. Its very odd that phantom jobs in the farming sector are appearing justifying alleged growth in GNP just in time to balance declining GDP that cannot be hidden!


Note the following paper does not account for the replacement of pharma products going out of patent. In the short to medium term there would appear to be no replacement scenarios lucrative enough to fill the losses due to current end of patents. suffice it to show there are no scenarios with Irish GDP on a steep growth path to make our debt sustainable.

“This paper sets out a number of simulations which use various export declines and import responses and suggests a net impact of a loss of 2 to 4 percentage points from GDP over a four-year horizon,depending on assumptions used. Corporation tax would probably reduce due to lower profitability in the sector. These simulations are illustrative only, and do not account for substitution on the supply or demand sides of the economy.”

“The sector is facing a number of challenges at present relating to over-capacity, significant R&D costs, a weak pipeline of new products and downward pricing pressures from healthcare payers”

“The current ‘patent cliff’ refers to a number of blockbuster drugs with about €200 billion in total global annual sales, which are set to go off patent  between 2011 and 2016, the majority of which are concentrated up to 2013.

Taken as a percentage of global sales, the patent cliff impacts on about a quarter of the value of the sector.”

“Corporation tax rate – Ireland has a corporation tax rate on trading income of 12.5 per cent.

Ireland is home to nine out of the top ten global pharma/biopharma companies and manufactures in part or full six of the top ten blockbusters drugs 15
coming off patent between 2011 and 201616.

This includes the bestselling drug in the world in 2011.”

“Exports of pharma-chem products (using our definition of SITC categories 51 and 54 in value terms) grew solidly to almost 30 per cent of GDP in 2011. Since mid-2012, exports of both categories in value terms have been on the decline (Figure 5), although the pace of decline has slowed in the early months of 2013. The year-on-year fall in pharma-chem products is the largest sustained decline in recent years. It contrasts sharply with strong performance over the past half-decade or so, which included only a very slight contraction in 2008 when global trade was particularly weak. The weakness in pharma-chem exports has also been reflected in overall merchandise trade performance too. In real (volume) terms merchandise exports fell by 5.5 per cent year-on-year in the first half of 2013, leading to six successive quarters of year-on-year contraction.”

“A number of illustrative simulations which use various export declines and import responses suggest a cumulative loss 2 per cent of GDP in a small decline scenario and 4 per cent of GDP in a large decline scenario over a five-year horizon. Corporation tax would probably fall due to lowerprofitability in the sector.”

We need to return to a real economy

Professor Garelli of

“In the end, the golden rules of competitiveness are simple: manufacture, diversify, export, invest in infrastructure, educate, support SMEs, enforce fiscal discipline, and above all maintain social cohesion,” concluded Professor Garelli.

Ireland has failed to end the debt extraction/extortion imposed by the troika.

Import substitution and manufacture should be a top priority. A return to values that are not financial service chicanery and redundant enslavement to a tax haven status serving the rich and built on extortion of the poor, should be abandoned.

A poorly conceived Euro project that has not served Ireland well needs to be brought to a close.












The Irish Central Bank

March 14, 2014

Ukrainian Crisis

As crisis in Ukraine deepens many are concerned that a war is being stage-managed to deflect from a growing economic crisis effecting the development of the euro area.

The following video gives some balance to the media propaganda that the democratic will of the Ukraine is being denied rather than a foreign backed neo natzi coup hidden from the general news media.

St Patrick’s Day Holiday

95% or more of Irish government ministers, some of the world’s highest paid politicians, have absconded to US and other parts of the world eg Vietnam to take part in St Patrick’s Day parade.

Eamon Gilmore TD interviewed about the high cost of these visits circa €250,000 spoke of the business generated for Ireland, a figure last year he dreamed up was circa €10ml. For example, he spoke of the new direct air routes to Canada.

It gave the RTE reporter a feel good to hear black is white.

Its a bit like Eamon Gilmore going to a football match in Croke Park and claiming his visit won the game for the winners.

On the contrary, such visits abroad often give a Banana Republic feel to observers at home and abroad. In Africa, such involvement in business by government is often seen critically as a mark of corruption, a notice that brown paper envelopes are expected to change hands at some point.

Not to be outdone, Enda Kenny erstwhile dictator of our benign republic entertained guests in the US to a call to telephone him directly if they wish to pursue business interests in Ireland.

Not that we have not learned that the business of government mixing with influential private business interests from developers et al led to our corrupt financial meltdown; that’s safely hidden away shrouded in secrecy carefully shredded from prying eye’s as demonstrated by our lack of a banking inquiry.

Business delegations do not require government ministers, letters of introduction would well suffice; Enterprise Ireland or IDA or a minor official from Department of Trade and Commerce to powerpoint the getgo of VRT/TAX, Corporation Tax and trade regulations would benefit trade instead.

Noonan and the Irish Central Bank

In a surprise move Michael Noonan has urged Morgan Kelly economist at UCD to meet with the Irish Central Bank re Kelly’s fears that property/commercial loans expose Irish SME’s; they could be subject of a new get tough experiment by the ECB following stress testing in 2014. ICB and banks maybe forced not to extend and pretend, they may call in the loans, thus devastating the Irish economy of which the SME’s are backbone.canstock8599636

The advice offered by Noonan reveals the policy making mindset of the Irish government in relation to management of the Irish economy; government is subservient and obedient to the dictats of the Irish Central Bank.

Clearly Noonan wants ICB to persuade Kelly to wear ICB blinkers.

Glove puppet relationships between the Irish Central Bank,  Regulator and government that Noonan’s comments illustrate should be the focus of a long postponed banking inquiry into the causes of our meltdown. Noonan’s comments provide a window into the relationship of government and ICB.

The ICB has a fundamental leadership role in the economic affairs of government, ICB has yet to be probed and brought to account for its role in Irish economic affairs. Its growing Orwellian Big Brother influence on government and Ireland’s economic life should be questioned and scrutinised more closely.

For simplicity, lets reduce questions  to one, what role, if any, has ICB played in our meltdown and subsequent development of macro economic policy in regard to bailout? Does the ICB have any questions to answer? 

Let’s ignore the “Over the four-year period of the Government’s plan, nominal GDP is forecast to grow by over 16%, or almost 4% per annum and real GDP growth will expand at a rate of 2.75% each year.” Pie in the sky figures no doubt from the ever inventive CSO.

The bailout was for €85bn and The Government said: “If drawn down in total today, the combined annual average interest rate would be of the order of 5.8% per annum. The rate will vary according to the timing of the drawdown and market conditions.”

The draconian and odious 5.8% was later reduced to conform with more lenient terms negotiated by Portugal and Greece. Both government and ICB failed in getting better terms. Though market conditions have changed there is no further leeway advocated by ICB.

ICB should be instrumental in demanding write down of Irish debt on the basis that Ireland was forced to take one for the team.

Advice given to the Irish government in relation to the bank guarantee we have yet to examine through a banking inquiry. It’s not insignificant that Prof Honahan of ICB has consistently denied the need for a banking inquiry probing these matters.

Indeed his announcement of a bailout for Ireland prior to its official announcement by government in Ireland arguably denied a better negotiating position for Ireland in relation to bailout.

ICB has fundamental questions to answer in relation to the state guarantee; in relation to the odious and penal interest rates attached to bailout, in relation to “There was no agreement on ‘haircuts’/discounts on bank bond debt.”

ICB as ECB bailiff 

A tougher role in regard to repossessions could have dark repercussions for the Irish economy; withdrawal of lending by Irish banks in anticipation of coming stress tests in 2014 will have negative impact; coercion of the credit union sector will have profound effect on democratic lending patterns in Ireland. All of these matters including its supervisory role of credit institutions should be independently scrutinised.

Since 2011 ICB has launched PRISM:

“Under PRISM, the most significant firms – those with the ability to have the greatest impact on financial stability and the consumer – will receive a high level of supervision under structured engagement plans, leading to early interventions to mitigate potential risks. Conversely, those firms which have the lowest potential adverse impact will be supervised reactively or through thematic assessments, with the Central Bank taking targeted enforcement action against firms across all impact why are we introducing  risk-based supervision categories whose poor behaviour risks jeopardising our statutory objectives including financial stability and consumer protection.”

ICB(Irish Cental Bank) across the credit union sector has applied tightening regulations and supervision leading to much controversy and closure of some credit union institutions. See earlier blogs.

However, Morgan Kelly’s warnings (see last blog) highlight stress test across the EMU in 2014 that may force the ICB to take a stronger line against Irish SME’s, one that could replicate across our economy, the calamitous experience of Bill Cullen with Ulster Bank part of the RBS(Royal Bank of Scotland) group. Bill Cullen claims Ulster Bank destroyed his business.

“Mr Cullen met Tomlinson three weeks ago.

The Yorkshire entrepreneur’s investigations into RBS and two Ulster bank cases has led to more than 40 new complaints from Ulster Bank customers in the Republic of Ireland and more than 50 in the North.

They are now the subject of three separate investigations including one by the UK’s Financial Conduct Authority (FCA).

Tomlinson has branded RBS/Ulster as a ‘vampire bank’.

Three months ago an Ulster Bank whistleblower claimed in the Sunday Independent that staff did close viable businesses  down in order to boost the bank’s bottom line.”

IRISH Central Bank and PRISM  (The Probability Risk and Impact SysteMTM (PRISMTM) is the Central Bank’s risk-based framework for the supervision of regulated firms)

One of the charges made against banks and the ICB was the lack of supervision of the financial sector, lack of regulation, a hands off approach that fatally led to financial meltdown.  ICB has since 2011 focused on risk based assessment and closer supervision of the financial sector, to reduce risk and to potentially avoid domino effects impacting the development of the economy by businesses such as that run by Bill Cullen.

PRISM aims to :

” operate a risk-based supervisory framework similar to that operated by significant financial regulators such as OSFI3 in Canada, APRA3 in Australia, the US Federal Reserve, De Nederlandsche Bank5, and the new Prudential Regulation Authority in the UK;”

Of particular concern to Kelly re SME sector is also highlighted as a concern for the ICB:

“The overall value of impaired loans continues to rise, albeit at a
declining rate (Chart A4). This impacts the real economy and
also the financial system, through a reduction in asset values on
banks’ balance sheets and, thus, affects banks’ willingness to
lend to the private sector. The level of distress among small and
medium enterprise (SME) borrowers is particularly acute. This
endangers not only the profitability of the banking sector, but
also has far-reaching consequences for the viability of corporates
and the employment they generate.

Credit risk is, therefore, a key concern for the domestic banking
sector. While the coverage ratio, which shows the value of
provisions for impaired loans relative to the value of impaired
loans, increased in the third quarter of 2013, uncertainties
remain about whether banks are sufficiently provisioned to cope
with the outstanding stock of distressed loans. The long-term
viability of the banking sector depends on its ability to return to
profitability. There have been some positive funding
developments such as a reduction in official sector liquidity
support, strongly supported recent debt issuance, and declines
in deposit rates, but the overall profile remains fragile and
vulnerable to swings in market sentiment.”
“Responding to the mortgage arrears resolution process initiated
by the Central Bank in November 2011 (including the
quantitative targets set in March 2013), banks have begun to
step up their interaction with borrowers so that sustainable
solutions can be proposed. It is vital that potential modifications
are affordable in both the short and the long-term and that the
changes provide sufficient clarity on what happens to the
collateral at maturity. In addition, restructuring targets have been
set to encourage banks to move distressed SME borrowers from
short-term forbearance to longer-term solutions.”

The ICB has also been embroiled in controversy in Galway with its demand that over 200 credit unions in the Galway area cut lending.

“Independent Senator Rónán Mullen has criticised the Central Bank for ordering over 200 Credit Unions to cut lending.” New rules for the credit union sector have been introduced that have been alleged to be draconian and in breach of the spirit of the credit union sector. The sector is largely voluntary and now subject of bureaucratic requirements and expensive professional expertise and software some argue is targeted at the movement to undermine it in favour of the commercial banking sector.

Mortgage and Commercial Property Lending

While there was no coverage on its 9pm news 11/12April  of the protest of 27000 teachers’ concern on the future of the Junior Cert in Irish education, full 5min coverage of Cheltenham was given including blanket coverage of Enda Kenny’s visit to Downing St; there was instead plenty of coverage across the news media tv/print of a family given a debt write-down of €150,000 on a €400000 mortgage.

The ICB has not backed or implemented a debt writedown of all mortgage debt in arrears on property purchased at the height of the boom bubble, even though original terms were often ridiculously subprime eg 100% mortgages; instead, the ICB has backed an inquisitorial, draconian, Shylock solution open to abuse of unfair influence or uneven decision making, exploiting the vulnerable.

NAMA and bank large developer loans have been written down and supported through recapitalisation of the banks, but crucially the SME sector has been ignored and banks supported in ravaging smaller loans in the commercial and mortgage sector.

The policy of looting and pillaging SME entrepreneurs with the view to large scale debt extraction on a personal one to one basis has not been sufficiently critically scrutinised. Without MABS citizens in mortgage and debt arrears would be left on their own to face the might of the banks.

ICB is in favour of a get tough policy on lending. Its lack of advocacy of a debt write-down scenario similar to that of Iceland is not questioned.

ICB ‘extend and pretend’ policy has had a negative impact on the Irish economy suffocating consumer demand and causing long term damage.

“The Central Bank, assisted by third party experts, has conducted
a Balance Sheet Assessment (BSA) of the credit institutions that
are subject to the Prudential Capital Assessment Review. The
requirement to complete the assessment was agreed with the
Troika as part of the programme of financial sector reform. The
BSA, together with new stress tests by the ECB in coordination
with the European Banking Authority next year, form part of the
comprehensive assessment of euro area banks in advance of
the establishment of the Single Supervisory Mechanism (SSM)
in 2014.”

BSA is contingent on recovery of outstanding loans with provision for losses ( a topic requiring detailed analysis ) uneven at best across the credit institutional sector; while PRISM ‘extend and pretend’ methods provide false accounting data projecting full repayment of loans that will never be repaid in full.

On the macro level, all boats beached or in dry dock due to the above anomalies, may sail again should the economy grow by 4-5% annually. The CSO cheerleaders of over estimation will help.

ICB is promoting a tale of ‘pigs will fly’ and ‘economic turnaround’ instead of proposing a policy of debt write-down.

The policy is so inept it is beyond belief. It is the source of all propaganda fed to politicians unable to think for themselves, reliant on false advice from ICB they are as prone to macro policy mistakes as Fianna Fail were in the Bertie era.

At that time, the ICB failed in its prudential mandate to rein in the banks.

Let’s call this error by the ICB the ‘soft landing’ error. We were fed this by FF previous to financial meltdown following 2008; the current coalition of FB/LB feed us the same mantra emanating from ICB, ‘soft recovery’.

Dead cat bounce of the economy is no soft recovery.

Black is white

“2013′s GDP figures show contraction of 0.3%, but GNP grew by 3.4%” Word on the street is that lots of pharma patents are coming to an end and that further falls in GDP output from pharma will follow.

Another factor feeding into the ‘confidence’ boosting propaganda is the return to the markets and falling cost eg “Irish 10-year yields fall to new record low below 3 pct” This follows yesterdays Spanish bond sale news

dropping yield on Spanish bonds beneath 3.7%. It would appear the inflated issuance of debt by Central banks around the world through programs of monetary easing in the US is to be used to inject more liquidity into economically unstable peripheral countries of the EMU, irrespective of their real economic profiles.

There is no change to the underlying causes of meltdown in EMU peripheral countries other than commitment to inject more credit lending and bond issuance adding to already unstable burden of debt/gdp ratios in these countries.

Its interesting to analyse the dichotomy between the story from the financial markets, markets due to US QE are flush with money looking for a home; the local economy in Ireland still remains broken by debt cf above concerns above re SME sector along with the commercial and mortgage property sector; yet, through austerity and large exposure to commercial and private debt, ‘confidence’ abounds.

Where does this confidence come from?

Some of it comes from the Draghi inspired threat that ECB will purchase bonds of EMU countries if the markets will not do so. Due to QE there is a lot of money about and large institutional investors have worked it out that investing in risky EMU countries will prevent a calamitous market crash that could cost them dearly.

The problem with this scenario is that underlying structural weaknesses in EMU economies besieged with austerity are not being addressed. The rich become richer while the poor due to austerity become poorer. This is a hidden inflationary path where the true mushrooming of debt balloons into inflationary rising stocks and shares indices that bear no true relationship to underlying economic value.

Markets are primed for a severe adjustment downward of up to 50%.

Greater attention should be given to the role and supervisory framework of the ICB in relation to the development of the Irish economy. It reveals serious judgment errors and a lack of prudential management  that puts at risk the future development of the Irish economy.

ICB sits atop a large economic mess. Its role in the mess should be subject to far more critical analysis than has been provided by media in Ireland hitherto.


State Propaganda

March 9, 2014

Presided over by Queenie a la Angela Merkel with Bono as Baldrick and Enda Kenny as Prince Percy one could wonder if we were being treated to a modern day episode of BBC’s Black Adder starring Rowan Atkinson.blackadder

It was difficult to suspend disbelief as up to 2,000 delegates arrived in Dublin this week  for the start of the European People’s Party (EPP) conference, where the group picked its preferred candidate to succeed José Manuel Barroso as president of the European Commission.

It was a signal of Ireland’s new protectorate, dominion status within the EMU, a far cry from 1916 and our constitutional independence. Setting the stage for the visit was the set aside of Dail business for three days of government propaganda as FG/LB mounted a propaganda media onslaught extolling its success since coming to office.

It could have been the funeral of Kim Il Sung of North Korea or event organised by Goebbels, Minister for Propaganda in Germany, instead we were treated to a real signal if one were needed of the passing of the Irish economy into the ownership of its paymaster Queenie and the German European People’s Party.

Enda Kenny played second fiddle.

In a distinctively vacuous, glove puppet speech he sang from the same hymn sheet he’s been drawing from since coming to office. While praising his government for stabilising the economy by imposing an odious burden of €67 bn bailout on his own people, a fact even the IMF found difficult to swallow, he takes unctuous pride in self-imposed austerity praising his own government for complicit obedience to Queenie and his success so far in carrying off the feat.

Not that the economy of Ireland has turned around and been saved from doom yet, see below.

His lack of success in obtaining relief from the odious debt bailout of German bondholders increases the irony of self-congratulatory sentiment. Massive emigration of young Irish people keeping them off the streets is a silent refutation of any claim to economic success. The propagandistic economic turnaround claimed by Enda Kenny has so far proved itself little more than a dead cat bounce.

The coalition demonstrating its mastery of  cult of personality propaganda shows the coalition have nothing to learn from North Korea; this was demonstrated in the participation of U2′s Bono at the event. According to Bono, “the Irish People Bailed the Irish People Out”…. To be fair, Bono supported the Financial Transaction Tax in his speech. It is ironic that the coalition are against such a tax.

His speech overall was even more cringing and vacuous than Kenny’s. No, Bono, the Irish people had no say in their bailout, it was imposed on them by political incompetence and devious chicanery. Perhaps a more attentive and precise consideration of language in support of his arguments would be a gain for him, rather than the baleful loss implicit in his immodest speech.

More irony is here than meets the eye. Bono is a tax exile and pays little or no tax in Ireland.

RTE coverage of Ukraine backdrop to EPP conference

Critics of the EPP and Bono were portrayed as nasty by RTE propaganda; RTE have been unable to deal with the complexity of Ukraine and Crimea riven by unfolding events reminiscent of the Serbian and Yugoslav wars where ultra right-wing nationalist hatred fueled ethnic cleansing.

Their coverage of the situation has been piecemeal and shoddy and one-sided. They have failed to get to the heart of the dangers of a growing nationalist extremist infiltration of democratic movements in the Ukraine. Such ultra nationalistic movements led to atrocities in Serbia and Bosnian genocide.

Clearly there is more at work here than legitimate desire for democracy in Ukraine and the West needs to be extremely careful that small mistakes do not mushroom into calamity.

Bono Tax

Like a stateless Apple paying a few million on billions of income stripping tax assets from countries right across the world, Bono has his own money safely hidden away in his own tax haven. Perhaps the OECD can designate his own tax affairs illegal along with the imposition of a full 40% transaction tax on Apple and U2?

Universal Health Care Farce or Comedy of Errors

White Paper model preparatory documentation for Free Universal Health Care now safely projected into 1919 is absent in the new propaganda models delivering this myth by the coalition. This was another Irish media topic for the EPP visitors if they glanced at Irish tv/radio.

It was difficult to pin this down, costings, how it could be funded, what it meant, when it would come about, but ‘Free Universal Health Care’ sounds good in a Orwellian universe.

Sale of BOI shares and false CSO figures

Meanwhile shares in BOI took a knock during the week with the sale of Wilbur Ross and Fairfax 6.4% of their stake. Shares in BOI traded 9% lower. One would presume the confidence mooted in the original purchase in the Irish economy of the stake, has run out.

Writing in the Sunday Independent 2 March 2014 P26, Colm McCarthy made the interesting observation that employment statistics quoted ad nauseam by members of the coalition in support of an employment turnaround in the Irish economy, are suspect. The CSO on this blog has been questioned before as to its role as propaganda arm of the state rather than true pursuit of objective and scientific analysis of data.

“The CSO conducts a quarterly household survey which provides the most comprehensive picture of trends in the labour market. Unfortunately, the figures for employment in agriculture have been distorted by methodology changes and they are making the overall picture look better than it really is. Over the last two years total employment has grown by just under 60000. But 37000 of this increase is supposed to have occurred in farming. Farm output has changed little over that period but on-farm employment appears to have grown by no less than 46%. Non farm employment has performed as indicated in the accompanying table below.”

McCarthy cites Industry -0.6%, Accommodation/Hospitality +12.8%, Construction -3.7%, Professional/Scientific Technical +19.7%, Public Admin, Health, Education, +0.5%, All Other -1.2%, total non farm, +1.3 (Source: CSO, Quarterly National Household survey, Q4 2013, Table 3a.

I would challenge these results further, especially in the Professional/Scientific Technical sector. We need a true auditing of claimed jobs provided by this sector.

This sector often advertises phantom jobs required by firms in receipt of government subvention and subsidy. Perhaps the media could examine more the claims made by companies advertising jobs to comply with their claim on subsidies, rather than the real supply of real jobs carried out by real people.

According to McCarthy “gross state debt is equal roughly to 150% of its annual income”.

1% or 2% marginal growth rates in the economy, or minor injections provided by the tourism “gathering” economy, show why Wilbur Ross and Fairfax are leaving along with our young people.

No amount of propaganda from FG/LB, the CSO and the media can hide the fact the Irish economy is in danger of imminent collapse through the inaction of FG/LB in obtaining debt write-down.

Unfortunately, Micheal Martin leader of FF, is leader of a party that brought about our financial meltdown, is a cheerleader of austerity,  is ex minister of the government that gave us the ludicrous state guarantee of debt in the banks. He has led support of the financial sector and bailout; is a look-alike political doppelganger of Enda Kenny.

He provides little opposition in a country whose confidence in its politicians has reached a new low, a country that is now little more than a puppet protectorate of the EPP with dominion status in a more and more Orwellian EU. Ultra nationalist extremism occurs as an element of another party in Irish political life.

Independents should do well next time out…


Shylock’s Pound of Flesh!

February 28, 2014

The three bailiffs, An Taoiseach, Enda Kenny, Minister for Finance, Mr Noonan and joined now by Minister for Justice and Law Reform, Alan Shatter are at one in their aim to scuttle Senator Quinn’s Upward Only rent Review bill.debtpercapita

They occupy  a parallel universe where black is white, musketeers of  ignoble, compliant  obedience to an unregulated financial sector to which taxpayers are offered as sacrificial lambs.

At European level they’ve failed to free Ireland from bonds of odious bailout with senior bondholders paid in full and levels of debt due to bank bailout suffocating development of the economy.

Ireland of all bailout countries in the EMU, has been dealt with the worst mainly through the incompetent decision of the previous and current government to ‘take a hit for the team’.

Noonan has singularly failed to get debt relief from its odious bailout by negotiating a deal on retrospective recapitalisation of banks.

In an absurd take on Ireland’s debt woes, the level of propaganda and falsification of our debacle has reached new heights with European Commission president José Manuel Barroso’s  invited to Ireland to accept an honorary doctorate of Laws from UCC.

(1)”Categorically rejecting suggestions Ireland should now be helped by Europe, at least in the short to medium term, European Commission President Jose-Manuel Barroso cut loose on Ireland.

He added that a deal made by finance ministers earlier this week on a banking union  was “for the future” and was “not retroactive”. Clearly Barrosa is at odds with Enda Kenny on this interpretation. Kenny and Shatter interpret black and white differently to the rest of us.

According to Mr Barroso the problems in the Irish banks caused a “major destabilisation” in the euro.

“I am saying this because it would be wrong to give the impression that Europe has created a problem for Ireland and now Europe has to help Ireland.”

“”So the euro was not the cause of the problems of Ireland. The euro was a victim of the problems by some practice, irresponsible practices, in the financial sector, that I repeat were not the responsibility of the European Union that at that time had no competence of all in matters of supervision.”

Barroso in reductio ad absurdum mode is a contradiction  stating “European Union that at that time had no competence of all in matters of supervision”. What?

Just as someone throwing petrol on a fire without supervision contributes to combustion, Ireland’s membership of the EMU and adoption of an unregulated currency was caused by ECB poorly designed with lack of a banking union authorisation effectively functioning in the supervision of member Central Banks.

Ireland was fed subprime mortgage finance by ECB ill-equipped to manage its monetary affairs in a badly designed EMS.

ECB’s limited remit of control of inflation while turning a blind eye to corruption, political and banking incompetence in outer core members led disaster.

Indeed Lack of regulation in Ireland is currently used by Barroso as justification of the need for a new banking union, a regulated framework for a new European Monetary System.

Barroso like Pilot washing his hands claims lack of EMS responsibility for a lack in prudential oversight when none existed from ECB….?

Who is fooling who in this tale of puppet masters and glove puppets?

The euro as a credit union currency was built on a foundation of regulatory pyrite; its walls have cracked and continue to crack,  in spite of efforts by Barroso to deny this is so.

Similarly in regard to breaking news today from Ukraine, already having given €13bn in grants and loans to Ukraine, Barroso is downplaying talks of further loans and aid.

Consider that Ukraine is in a state of bankruptcy with a huge problem of political corruption and facing the danger of civil war, the mind boggles at the empty logic behind Barroso’s claim to offer Ukraine sanctuary in the EU, without massive state aid from the EMS.

Barroso downplays reports of large-scale aid.

His remit is obviously to defend the EMS inner core for any financial liability for any debt either in Ireland or elsewhere in outer core EMS or, as now, for Ukraine. The EMS is a divided currency union based on debt extraction from the outer core to the inner core, a currency union feeding upon itself.

Bank rolling political corruption and insolvency would appear to be the unregulated role and aim of the EMS. The Bundestag cannot be too happy with the consequent risk to German finance.

The Ukrainian and Irish people deserve better.


Michael Taft(3) has published these charts that get behind the propaganda hiding our true debt levels as eg % of GDP where GDP is falsified by MNC figures :debtpercapitaincome

“Measurements which use GDP as the benchmark can distort Irish data given that GDP is flattered by the accounting practices of multi-nationals.  For instance, when using Gross National Income as the benchmark (which is equivalent to GNP) which removes international flow such as profit repatriation, debt in Ireland is 143 percent of GNI.  This is the second highest, only exceeded by Greece.  But the fun doesn’t stop there.  The ESRI has found that even our GNP/GNI is inflated due to multi-national activities (undistributed profits of headquartering multi-nationals).  If this was factored out, we’d be reaching Greek levels of debt.”

In spite of the inglorious efforts of our three musketeers above, Ireland remains an EMS toxic debt dump looted by international hedge funds collecting trophy property portfolios at knock down prices, riven by dreadnought austerity with the future culling of its educational and health and public service.

Future growth is Ireland is not about the piecemeal addition of a slight improvement of the patient on the Irish economy’s death-bed, it’s about dealing with the major obstacle to growth represented by our unsustainable and toxic debt levels.

Our current head in the sand government’s denial of these self-evident facts is a political failure trumped with propaganda claiming success with payback consequences for future generations.

Upward Only Rent Reviews

“You will answer
’The slaves are ours.’ So do I answer you.
The pound of flesh which I demand of him
Is dearly bought. ‘Tis mine, and I will have it.

Minister For Justice, Equality and Law Reform, Alan Shatter and Minister of State Michael Ring are opposed to the Upward Only Rent Review Reform Bill of Fergal Quinn which seeks to curb the rights of businesses to demand a reduction in rent proportional to their falling business levels and proportional to austerity cutbacks imposed on other areas of the Irish economy.

Yes, once again, its one law for the rich, another for the poor.

The modern day version of Shylock’s insistence of payment of Antonio’s flesh from Merchant of Venice(1596) is seen in ‘upward only rent reviews’ in Ireland.

Particularly reprehensible in Shatter’s statement is the attempt to equate the rights of owners of UO’s to their rights under the constitution.

Article 21 gives the power to the Dail to bring forward a Money Bill that could declare the troika bailout terms and lack of retroactive recapitalisation of our banks, as odious, and not in keeping with our sovereign constitutional rights stated in our constitution’s preamble. It could also be a base to defend against the unconstitutionality of UO’s rather than its opposite:

“And seeking to promote the common good, with due observance of Prudence, Justice and Charity, so that the dignity and freedom of the individual may be assured, true social order attained, the unity of our country restored, and concord established with other nations”

Clearly UO’s are unjust. Falling incomes, increasing taxes, smaller business throughput, means the Sheriff of Nottingham’s can only increase rent, not decrease rent?

One law for the financial sector, another for Joe Soap.

Article 43 of the constitution:

“2. 1° The State recognises, however, that the exercise of the rights mentioned in the foregoing provisions of this Article ought, in civil society, to be regulated by the principles of social justice.

2° The State, accordingly, may as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good.”

Legislation curtailing the odious UO’s needs to be implemented immediately for the sake of the common good. Article 43 could be invoked to defend against the unjust extraction of contract terms negotiated in different times under sets of expectations that have altered and changed.

It’s ironic that Shatter invokes the constitution to defend the rights of the few at the expense of the majority.

UO’s (Upward Only Rent Reviews) in legal terms echo Ireland’s political compliance and obedience to the financial sector, the banks and their well paid legal guardians. The figurative use of the phrase refers to legal at the same time unreasonable recompense.

Members of Seanad Eireann led by Senator Fergal Quinn have published a Bill proposing to ban UO’s .

The odious and constricting weight of the financial system, the banks, is used  Oct 2 in an attempt to stifle debate on the matter by Michael Ring TD on behalf of Alan Shatter. Justice, Equality and Law Reform are absent in the following:

“However, it is also the case that not all tenants are in financial or trading difficulties and, notwithstanding some of the baggage that may arise out of our history, regard must be had to the fact that some landlords have their own financial difficulties, for example, a landlord may be dependent on receipt of the contractually agreed rental income in order to discharge a mortgage obligation on the leased property. In purporting to treat all tenants equally by giving them the benefit of the Bill’s provisions there is a risk that some will be given a benefit which they do not need and that some landlords may suffer disproportionate disadvantage. Furthermore, the complexity of the financial arrangements which sometime underpin commercial lease arrangements is completely ignored in the Bill.”

The above approach is in striking contrast to that of Iceland that has recently written down mortgage debt in order to boost its own economy.

A large part of the loan book of Irish banks is served by loans given out into the commercial property sector to landlords with mortgages the banks want paid bank, or banks risk their loan book with their capitalisation in danger of further write down.

This places the financial sector at odds with the requirements of a growing economy imposing an impedance on viability and sustainability for businesses facing higher costs and lower returns across the board.

Higher taxes, lower business activity due to the effects of austerity on the business community and general population should in a reasonable state of affairs reflect lower rental/lease cost for business owners.

Less for the majority feeling the brunt of austerity does not mean less for the financial sector would appear to be the maxim followed by the present government. Ironically they were put in power by the people to defend the people against the banks and financial institutions.

These same arguments were previously used to justify the payoff of senior bondholders who could not believe their luck the Irish paid up on their casino bets on Irish banks following their financial meltdown.

We have yet to get a banking inquiry to get to the heart of the matter to settle the argument between Jean-Claude Trichet in his then role as head of the ECB who argues he did not force the guarantee on Ireland, nor did he demand Ireland should repay all its senior bondholders.

The odious and deeply onerous ligature of residual debt obligations following the Irish bank crisis is exemplified by UO’s and is a signal of the malaise of deflationary tendencies in the Irish economy that will impact and deeply inhibit recovery.

Suffocating and constricting debt levels grow while profits, salaries, expenditure in the retail economy slows.

Deflation in the Irish economy because of its troika bailout terms and lack of retroactive bailout of its banking sector is more severe than at first glance. Its hidden by repatriation of profits by MNC’s distorting figures such as debt to GDP CSO figures. Michael Taft’s charts here attempt to describe debt burden for Irish people in a more revealing way.

Without shared write-down of these OU’s profits on smaller footfall especially in the retail sector will be made uneconomic leading to further business closures. Once again the property and financial sector is being protected while the retail and real economy along with prospects for future generations thrown to the wolves. A property bubble encouraged by the banking sector would appear to be on the horizon, a repeat of past errors.




Debt Slaves

February 23, 2014

One of the hallmarks of the current government is its servile obedience to the financial sector. Currently up for sale are 13000 mortgages of Irish Nationwide(1) on sale to the highest bidder. Families are terrified they will lose any remaining consumer protection they have under Irish Law, that they will instead face instant eviction in a go tough policy.

In contrast (2)every household in Iceland will have €24,000 worth of debt written off.

“The move was part of the election manifesto of the Progressive Party, led by Prime Minister Sigmundur David Gunnlaugsson.

This will cost the country €1.2 billion and will begin in mid-2014. Iceland has been burdened with debt since the 2008 financial crisis, which saw the krona collapse.”iceland-unemployment-rate

Iceland hopes this will kickstart consumer spending . Iceland has an unemployment rate heading for 4% while Ireland’s unemployment rate in spite of large-scale emigration is heading for 14%.

Lack of consumer spending combined with dangerous levels of personal and public debt lead to deflation.

(3)”Question: What Is Deflation?

Answer: The standard deflation definition is when asset and consumer prices continue to fall. This may seem like a great thing to consumers, except that the cause for widespread deflation is a long-term drop in demand. Unfortunately, a drop in demand means that a recession is probably already underway, with job losses, declining wages, and an ongoing decline in the value of your home and your stock portfolio. Deflation is a result of businesses dropping prices in a desperate attempt to get people to buy their products.”

VAT receipts for the year 2013 show a drop in consumer demand though this is obscured by the esoteric CSO measurement of giving results measured against expected receipts rather than actual receipts measured against those of previous years.

Government would appear to be adopting the strategy of under spending by circa €400m in capital investment as a buffer against declining tax returns.

Nearly 20% of the total mortgage stock according to the Central Bank are now in arrears (5). Job losses, declining wages, businesses under growing pressure mean debt is more difficult to service in Ireland.

Additionally, growing direct and indirect taxation through property charges, water charges and increasing pressure from Europe to close exemptions and loopholes in the collection of VAT, mean deflation in Ireland is on the increase with consequent further damage and loss to the economy.

The magic figure of 3% growth is held out as a panacea that will allow Ireland to escape its straight jacket of debt, escape the negative effects of deflation and halt economic decline.

The US heading for a debt burden of $60trillion faces the difficult task of unwinding from its current QE commitments. As soon as it withdraws support for QE, as it must, the global economy shivers and signals a fall.

The decline of the middle class alongside the growing divergence between rich and poor in the US show that the burden of deflation has been imposed on the majority of americans while counterbalancing inflation has been exported into stocks and shares making the rich richer and the poor, poorer, a sign of economic decline to come.

QE has benefited the rich with much of that wealth exported out of the US some of it finding its way to Ireland with vulture funds and hedge funds looting the property portfolios of NAMA and Irish Nationwide above.

So, where will worldwide economic growth come from helping Ireland to reach its magic 3% ( in reality it requires 3.8 -4% growth for economic sustainability, but lets work with 3%.

Europe hovers on deflation and 0-1% growth. See last blog “The ECB’s non-standard monetary policy measures amount to the similar print and burn money operation of the US, a feature of EU and ECB policy required to dodge explicit laws at European Treaty level to prevent QE or direct financing of sovereigns.”

This policy is now being challenged in the European Court having been referred there by the Bundestag (7). Clearly ordinary Germans are worried the cost of bailout of members of the EMU may become their burden at some point.

If the response of the ECB and EU and IMF are anything to go by, they clearly have nothing to worry about. The original vision of the EU to bring the outer core members up to the level of economic performance and output and standard of living of the inner core has been abandoned in favour of a new 2 tier Europe with inner core member states transfusion of the lifeblood of outer core members to further economic growth of Germany.

This puts the European project at risk of imminent failure.

Can worldwide engine of growth be kickstarted by China? China’s aims for 7% growth targets have been put at risk recently by moves to curb the explosion of dodgy lending through its shadow banking industry.

Statistics from China are less than reliable in many respects but fears abound re ghost cities that echo apocryphal ghost estates in Ireland with their backdrop of corrupt officials and planning laws.

Can growth come from India, the world’s third largest economy(9)?

“(Reuters) – The World Bank sharply lowered its forecast for India’s economic growth to 4.7 percent from 6.1 percent for the current fiscal year, citing a sharp slowdown in manufacturing and investment as well as negative business confidence.”

Can growth come from Japan, the world’s fourth largest economy?

Japan has succeeded in downplaying the consequences of the Fukushima nuclear plant disaster for its economy. Media reports on the disaster as in the case of Chernobyl usually consist of a single reporter with a webcam describing the devastation. Empirical evidence of a scientific nature is obscured and obfuscated by TEPCO, but we do know they are currently embarked on decommissioning the fourth reactor and that overall decommissioning will take another 40 years.

The cost of this is largely unknown, while empirical data on the cost of the damage from an environmental and human health and plant is speculatively soft, the economic damage of the disaster is even harder to come by.

(10) “100 tons radioactive contaminated water leaked last August from Japan’s Fukushima Nuclear Power plant. Last Wed 19th Feb another 100 tons leaked latest in a long line of problems since the meltdown of March 2011. Doubts are being raised on how sloppy the response has been to this nuclear disaster and questions on its long-term impact still remain difficult to assess.”

Mistrust of TEPCO Tokyo electric Power Company is high. Removal of 1500 spent fuel rods in the dangerous reactor 4 is ongoing entering its most dangerous phase yet. Decommissioning will take another 40 years.

Restarting the silent 50 other reactors subject of safety checking that power Japan’s power grid is a matter of heated debate.

The 9th magnitude earthquake suffered by Fukushima has led Japan to abandon its nuclear program and its having devastating effects on its economy.

“At the moment Japan is entirely without nuclear energy, but that is unlikely to last for long. Shinzo Abe, the prime minister, is pushing for as many of the country’s 50 usable reactors to restart as soon as possible after passing safety checks by the NRA. The need to import energy has pushed up the price of electricity and added to a series of trade deficits since 2011.

………..Most of the public are broadly against restarting nuclear plants even once they pass new checks. “

Japan’s economy, fourth largest  in the world, is in trouble.

The Lost Decade

Before Fukushima Japan had endured its Lost Decade. Its economic collapse in 1992 had many echoes and similarities to Ireland’s  economic collapse from 2008 onward to today though being the world’s 4th largest economy, economies of scale are different. Japan has circa 30ml living on its 4 main group of islands.

Non performing assets with difficulties in financial institutions and non performing loans did not have the brake of hedge fund and vulture fund activity and troika bailout we currently see hiding meltdown in Ireland and creating a false bottom to its commercial and residential property industry.

“The Japanese asset price bubble (バブル景気 baburu keiki?, lit. “bubble economy”) was an economic bubble in Japan from 1986 to 1991, in which real estate and stock prices were greatly inflated.[1] The bubble episode has been characterized by rapid acceleration of asset prices, overheated economic activity as well as uncontrolled money supply and credit expansion.[2] More specifically, over-confidence and speculation over asset and stock prices has been closely associated with excessive monetary easing policy at that time.[3]

“As of December 2013, Japan’spublic debt was more than 200 percent of its annual gross domestic product, the second largest of any nation in the world. In August 2011, Moody’srating has cut Japan’s long-term sovereign debt rating one notch from Aa3 to Aa2 inline with the size of the country’s deficit and borrowing level. The large budget deficits and government debt since the 2009 global recession and followed by earthquake and tsunami in March 2011 made the rating downgrade.[102] The service sector accounts for three-quarters of the gross domestic product.[103]

“”Imports have been pushed up by the weak yen and strong demand for fossil fuels to make up for nuclear power lost since the 2011 Fukushima crisis.”

“There are worries in some quarters that the trade shortfalls could pull the current account into the red in coming years, meaning that Japan may start chipping away at its vast pool of domestic savings and increasing the need to rein in its huge public debt.”

Current plans to increase sales tax in Japan in April will further dampen the economy leading to dangers of a stall.

This comes on 2013 Japan’s QE doubling the money supply in the economy that led to weakening of the yen against other currencies and subsequent objections by China threatened by Japan’s competitive edge(16).

QE has not worked for Japan though it may have covered up the economic effects of Fukushima and its rising cost of energy imports and loss of competitive edge.

It would appear economic growth in the world’s global village economy that led to the expansion of fiat money and derivative expansion of the unregulated shadow banking sector is now beginning to contract with such a contraction having unknown repercussions.

QE has made the rich richer and the poor poorer. Austerity has made the divide even deeper.

The world is becoming more entrenched in an Egyptian Pharoah replicant society of Too Big To Succeed pyramid banks.

The maxim being followed in Ireland is AUSTERITY to make sure the show goes on for as long as possible with the losses gained by the rich 1% passed onto the 99%. This may work in the short term, but it wont work in the long term.

Modern day pharoah builders of today’s Too Big To Succeed Investment banks should ruminate on Shelley’s epitaph to their forebears

“My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!”
Nothing beside remains: round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away.

QE finance is more permeable and porous than rock or ancient stone.

Ireland’s 1/5 mortgage debt serfs their bondage and servitude exacerbated by government inaction deserve better:

(19)Serf “A member of the lowest feudal class, attached to the land owned by a lord and required to perform labor in return for certain legal or customary rights..”





















NAMA monster could devour Irish economy!

NAMA monster could devour Irish economy!

A little like Lord Cardigan telling the Light Brigade to advance yet again against Russian guns, Enda Kenny with little to nothing to show for vindicating Ireland’s right to a debt write-down, continues to bleep Ireland should get a debt write-down corresponding to a recapitalisation of its banking system.

At European level no one listens. Echoing such calls is Minister Noonan. Having carved all the meat from the bone of the Irish Health and Education system; hospitals like Portlaoise with staff doing the work of 2 or more persons, a dangerous trolley service; teaching profession with teachers doing the work of 2 people or more, teachers now expected to draft syllabi, set examinations and correct state examinations, both sectors starved of investment and victim of rundown, both Kenny and Noonan maintain black is white. Both Noonan and Kenny consider their austerity policies a success!

The European Council

The European Council is subject to the wishes of European parliaments. A retroactive bailout of Irish banks funded by ECB would first require the authority and compliance of all member Finance Ministers of the EMU.

Minister Noonan or Taoiseach Kenny are not embarked on a round of visits to European Finance ministers to gain support for their cause. I havn’t heard of any promise of outright support for Kenny’s crusade which so far has proved to be a tilt at windmills.

But austerity is not an illusion. In a despicable intervention in the Tallaght Hospital dispute where frontline staff collectively flagged the danger of inadequate emergency cover, Eamon Gilmore of the Labour Party apparently quoted the CEO of Tallaght in stating the service was safe. (3)

The irony is that the looting of the Irish public service with its consequence of unmanageable burden placed on the smaller and smaller cohort left to service it, has made such jobs unattractive with absurd demands leading to flight of doctors/nurses/teachers joining the emigration trail.

Noonan’s Empty Basket

Finance Minister Noonan has a difficult job at the moment. Under pressure to do more to vindicate the right of Ireland to retrospective bailout of its banks costing at present up to 30% of its debt to GDP ratio, if he shouts louder at European level, he’s in danger of further humiliation from European finance ministers, who’ve said on numerous occasions, there will not be retrospective debt relief for Ireland.

European Finance ministers are adamant they will not be saddled with the bill Ireland has so graciously taken upon itself to pay bondholders laughing all the way to their banks in Germany and France.

Irish government has morphed into Irish Debt sheriffs of the troika. It has not fixed the banks. Kenny continuously alludes to the European Council meeting of 29th June 2012 that made a decision clearly referring to future policy for dealing with future crises in the banking sector.

Kenny though corrected repeatedly still peddles the erroneous and denied promise of retrospective bailout of the Irish banking sector.

Meanwhile mortgage distress has not been adequately dealt with, banks are not lending to SME’s, to prospective property investors or those seeking a mortgage.

QE (quantitive easing) in the US has led to a storm of money available to cushion out/loot property buyouts in the residential and commercial sector in Ireland.

This has created a false bottom to the Irish property market inflating prices and danger of creating a further bubble in property in Dublin. Irish so-called ‘pillar banks’ require high property prices to extort rent from large property loans that still are viable on their books.

QE in the US, a stabilisation of money markets with larger and larger volumes of hot money have made the international money markets nervous and more volatile with plenty of kindling for sudden bush fires caused by eg cutting back of QE.

This financial crisis is not over yet

Looting and pillaging of public services, the safeguarding of the assets of the rich at the expense of defenceless tax payers with unfair burden on the less well off is accompanied by frenzied propaganda that somehow with levels of commercial and private debt approaching 125% of debt to GDP, that we have turned the corner.

The Irish economy filled with the QE of US vulture fund money and troika bailout along with further deleveraging and asset destruction is about as safe as the Hindenberg

The ECB’s non-standard monetary policy measures amount to the same print and burn money operation of the US, a feature of EU and ECB policy required to dodge explicit laws at European Treaty level to prevent QE or direct financing of sovereigns.

The workaround was to directly fund banks in return for promises based on collateralised  debt assets.

Returning property bubble pricing in Dublin

The ordinary couple in Dublin besieged by rising taxes and charges and victims of short-term contract labour if they find work, cannot pay the false bottom of property prices fed to them by the banks. On top of that, banks are not lending to such couples.

Propaganda states the property sector has bottomed out in Dublin and a bubble is forecast. The irony is that movement in the property sector is primarily the result of vulture fund activity. An economy being eaten by vulture funds is not a sign of growth.

Guarantee of low corporation taxation in Ireland allied to the promise of low taxation on high salaries including low tax on the wealth assets of the rich leading to an influx of postal box internet companies, is not a sign of growth.

But it is a sign of the transmogrification of the Irish economy into a proto banana republic economy such as those that existed of yore in Latin America or as a newer version of a satellite state of the former USSR with wider disparities in income and extinction of the middle class who witness their offspring take flight through emigration.

Nama is the Irish Borg vessel hiding a huge amount of vulture fund activity cloaked and protected under the FOI act with immunity from public scrutiny. The financial sector has learned to circumvent democracy. Perhaps some of the expensive court case actions against NAMA to be taken by developers protecting their property folios may issue more information on their operations currently cloaked from public scrutiny.

Ireland pays dearly and did not benefit from the ECB’s non-standard monetary policy measures used in the main to protect its inner core banks from the devastation incurred without such supports for banks in Ireland.

Traditional fixes, bailout and burn through austerity measures were imposed on Ireland

Ireland,  paying 30% of its GDP in terms of debt repayments to European institutions Ireland is a  scarecrow example of new European fiscal policy whereby both the market place and sovereign public institutions and public services are made slave to a new financial services model that both controls and perpetuates the smoke and mirror ball of smoke financial sector show on the road.

Co-opted into the project are the propaganda arms of the state and large parts of the media, who maintain large and growing gaps between the wealthy and the poor in Irish society are to be ignored.

Vulture Funds

Vulture funds have targeted both Ireland and Spain scooping up property portfolios at bargain prices in Dublin giving the false impression the return of property demand is due to economic growth rather than looting of the Irish economy.

“Vulture funds, such as private equity firms and hedge funds, have descended on Ireland and the rest of Europe since the downturn, seeking assets that have plunged in value and are now under priced.

Traditionally they buy up the debt on companies that are perceived to be on the verge of collapse for cents in the dollar and hope to turn a profit when the company defaults on its debts.”(1)

Already active picking the stressed assets of IBRC and in court to challenge the winding up of IBRC (2)

ECB’s Non Standard Policy Measures 

Jean Claude Trichet head of the ECB at the time of Ireland’s bailout,  FF ministers and the opposition who allowed the state guarantee of the Irish banking system opposition to go through. Central bank and Irish Regulators have yet to reveal in an Irish banking inquiry their role in support of the Irish economy previous to its collapse.

ecbwp1528 “provides an overview of the non-standard measures taken by the ECB (greyed areas) in comparison with measures taken by other major central banks during the financial crisis, and their associated risk profile.”

Though the authors argue against this, their work clearly shows the ECB protection of price and asset and interest rate stability in the euro area has come at the sacrifice of widening disparity between the inner core and outer core of the EU.

In fact, to cushion itself from the economic impacts of the financial crisis it is evident that countries such as Ireland have been sacrificed as pawns to protect the inner core.

Bailouts have extorted disproportionate cost of defending the euro to peripheral countries. This has led to widening gaps between rich and poor in bailout countries and similar widening gaps between inner and outer core countries with extractor bailout funds deleveraging of the outer core and strengthening the inner core.

As is usually the case big banks gain on the upside and gain on the downside.

The inner core countries of Germany and France have sucked wealth out of the outer core and funneled it back to itself damaging the credit union nature of the euro, binding the outer core into a compliant quid pro quo support of elites in programme countries. Democracy has been damaged with member countries reduced to protectorate status.

Bailout involves the conditional liability of supports for dysfunctional states in the euro area.

” As the euro area is not a federal union, the Treaty on the Functioning of the European Union(henceforth called the Treaty) includes a number of provisions to correct for disincentives to fiscal discipline that the single currency would otherwise imply. These provisions include, in particular, the prohibition of monetary financing by the central bank (Article 123),1 the prohibition of privileged access by public institutions or governments to financial institutions(Article 124),2 the “no-bailout” clause (Article 125),the fiscal provisions for avoiding excessive government deficits (Article 126) and the Stability and Growth Pact (SGP, which is actually separate from the Treaty itself).”

One can admire the casuistry of authors Philippine Cour-Thimann and Bernhard Winkler who argue that outright monetary transactions ECB’s bond purchasing programs are not in breach of European Treaty Law below “OMTs are aimed at ensuring the proper transmission of the ECB’s interest rates to the euro area economy and the singleness of its monetary policy.

Outright monetary transactions “OMTs are limited to transactions in secondary markets for sovereign bonds: the money goes to investors, not to the sovereign issuer. The transactions are focused on short-term maturities. Finally, and most importantly, OMTs require explicit conditionality attached to an appropriate European Financial Stability Facility (EFSF)/European Stability Mechanism (ESM) programme, to ensure that governments to make the necessary efforts to restore the sustainability of public finances.”

Lets think about this. Bonds rejected as dodgy by the markets are underscored and guaranteed by the OMT programme. Rotten apples become ripe because someone is willing to pay for them!

This contributes to a mirage economy manufactured by the Central banks. Illusion is the new reality, market forces are repudiated. The end of this game will lead to the euro becoming as valuable as a daffodil, a managed economic currency with the credibility of a previous USSR leveraging asset credibility from a time in the past before the distortion of values by Central banks post crisis.

Post crisis sows the seeds of further crises

Credibility and confidence in the euro area is no longer a function of internal markets in the euro area, rather it now becomes the function of esoteric financial markets with unlimited and supposed binding control of the real market place; complimented by the required compliance  of democratically controlled institutions now monetized into billable taxpayers.

It would appear that support for financial markets is now driven by the ECB to the point that bondholders are now provided with unlimited guarantees irrespective of any underlying market forces whatsoever.

Indeed the bond market itself is now totally under the remit and control of the ECB. The market no longer controls the ECB, the ECB controls the market.

Countries such as Germany, in particular the German Bundesbank are worried that eventually such a policy will dilute German sovereignty making German taxpayers liable for losses  if this policy unwinds.

Restrictions to this policy expressed eg in troika control of Ireland’s economy and similar troika interventions in Greece, Spain and Portugal and even Italy express a watering down of Fiscal policy in the EMU leading to future erosion of the euro if such measures fail to deliver market stability. They will lead to loss of confidence in the euro.

However, on the plus side explicit conditionality is meant to curb the following abuse of the interbank market in the euro area:

“In particular, the banking system of a country with persistent current account deficits could easily fund net cross-border payment outflows associated with net imports of goods and services with money raised in the cross-border interbank market or by means of other forms of funding such as attracting foreign direct investment or placing debt securities abroad. As a result, imbalances in the current and financial accounts of the balance of payments of certain euro area countries were left unaddressed by national policies and continued to grow.”

Its clear the price for monetary reform at ECB level is increased Big Brother oversight of member states. Lack of credibility of such a policy will be expressed by market forces in two ways: 1. political stability in the euro area; 2. economic growth. Without the reward of economic growth this policy will founder.

Eventually economic growth will require expression in terms of employment figures and production of goods and services that adequately address the needs of people: not in terms of support of chimerical bond purchase programmes that provide temporary relief for the super rich in the hope of trickle down crumbs for the extorted poor.

Interest rate policy

On Feb 7, 2014, “Germany’s Constitutional Court will refer a complaint against the European Central Bank’s flagship bond-buying scheme to the European Court of Justice, removing the prospect of it curbing the programme.”

“The court said on Friday there was good reason to think the scheme “exceeds the European Central Bank’s monetary policy mandate and thus infringes the powers of the member states, and that it violates the prohibition of monetary financing of the budget”.

“While the ECB has no immediate need to use the plan, the lack of final clarity over its legality may still crimp its room for maneuver on other measures.”

“The German court said it will rule on the legality of the currency bloc’s permanent bailout scheme, the European Stability Mechanism (ESM), on March 18.”

“The ECB’s Outright Monetary Transactions (OMT) program, announced by ECB President Mario Draught in September 2012 at the height of the sovereign debt crisis and as yet unused, is widely credited with stabilizing the euro.

Any potential curb on it would alarm investors.

The OMT’s power lies in its promise of potentially unlimited sovereign bond purchases – a prospect that provided the necessary backstop to calm fears the euro would fall apart.”

A new politics for Ireland

If we cannot leave the euro and simply leave  our relationship with Europe to that of Switzerland’s membership of EFTA, as this writer has advocated, if economic sovereignty with our levels of debt to GDP has been abrogated and capitulated at European level, if Irish politicians are so enamoured of the EMU, EU, ECB and IMF, perhaps its time to reengineer politics in Ireland to reflect new realities.

As a European protectorate Ireland does not require its current levels of political representation. A Swiss canton system with greater local representation with higher numbers of local independents might be more effective than our current banking bailiff system protecting the elite at the expense of the majority.

Propagandists who support forgiving and paying the debts of the super rich have their eye on our public services. Super rich bondholders down to the ‘no tax as I’m a tax exile’ Dennis O Brien’s  pay little or no tax and if their casino investments are lost, they get bailed out by taxpayers with no one to pay the debt of taxpayers.

I wonder what the world would be like if things were the other way round.

As public services are pillaged, less public services mean less public investment in education and health. The rich can afford to pay for private health care and private education from their tax savings or other assets.

Further down the pecking order the axiom has developed that the more money you have, the less tax you pay; the less money you have, the more…you said it. Philanthropy ..the desire to promote the welfare of others, expressed especially by the generous donation of money to good causes, is less to do with helping the poor, than grandiose efforts of self glorification.

Beyond Outrage

Robert B Reich in his book, “Beyond Outrage”, Reich writes of ‘the decline of the public good’. 10% of all philanthropic charitable donations actually go to the poor. The rest goes to self aggrandising projects to further the prestige of the donor to win back  lost respect. No matter that million dollar dream deals are offered to football managers such as Trappatoni or current replacements, while school funding for sports and culture declines further.

The new mantra of scalping the poor and the public good with the public good masking private gain is seen in the recent unearthing of scandalous payments to those running our charities.

In the US according to Reich, ” total public spending on education, infrastructure, and basic research has dropped from 12 percent of GDP in the 1970s to less than 3 percent in 2011.”(5)

We are familiar with the decline of the middle class as realised by Obama in his ‘boost middle class speech’ speech (6)

In the UK here is a list of salary scales of executive positions in charities:,12406,1042677,00.html

In Ireland the Cork Examiner did a useful survey though the following charities refused to cooperate “* Six charities — Arthritis Ireland, Bóthar, Unicef Ireland, the Irish Society for the Prevention of Cruelty to Children”

“AN Irish Examiner survey of the pay packages earned by the heads of leading charities shows most are on salaries ranging from €100,000 to €150,000.”(7)

At first glance there is  a much broader standard deviation between salary scales in the UK compared to Ireland. The sample in Ireland is much smaller. Population in UK is approx 60ml compared to approx 6ml in Ireland. The fact that the job in terms of population levels must be 10 times harder in the UK is not reflected in salary scales between the two countries.

Obscenely it would appear some Irish charities have matched their salary scales to that of the Irish civil service Assistant  Secretary levels of (figures only given up to 2010) €120k – €150k and Principal level €85 – €105k

Salary scales in NI and UK

Elite have too many overpaid TD’s in Ireland

As we have now become a prota pretend state , a protectorate run from Europe with too many TD’s

From wikipedia “Number of members[edit]

“Under the Constitution of Ireland there must never be fewer than one TD for every thirty thousand of the population, nor more than one for every twenty thousand. In the 29th Dáil there was one TD for every 25,000 citizens, this is in line with many other European Union member state national parliament ratios with Malta having one MP for every 6,000 citizens and Spain having one MP for every 130,000 citizens. Ireland has a similar MP to Citizen ratio toBulgaria, the CzechRepublicDenmarkFinlandHungaryLatviaLithuania and Sweden.

With the adoption of the current constitution in 1937 the membership of the Dáil was reduced from 153 to 138, but in the 1960s the number was increased to 144, only to be increased more substantially in 1981 to the current figure of 166. The Electoral (Amendment) Act 2011 provides that the number of members “shall be not less than 153 and not more than 160″.[6] This will come into effect at the next general election.”

In present circumstances we could do with less than 100 td’s and a salary cut of one-third to bring representation and salary lines in line with that of other countries and our circumstances.

In the recent past TD’s have cost the Irish taxpayer billions. At European level they oppose a wealth tax on financial transactions. Their policies protect the wealthy and they prey upon the poor and defenceless. Development of services and infrastructure have been replaced with the transfusion of their lifeblood to foreign creditor puppet masters.

The Public Good  is considered bad by the wealthy who regard such interests as against their interests.

Taoiseach’s salary(8)

“When An Taoiseach came to office in March 2011, one of his first acts was to cut his pay and that of An Tanaiste, ministers and ministers of state by 6.6%, so An Taoiseach’s salary went from €214, 187 to €200,000 which was a gesture of sorts, but nothing like the €82,000 cut to the French president’s salary introduced by Francois Hollande in 2012 which brought the salary for that post down from €253,000 to €171,000.”


“And after today’s decline, An Taoiseach will still earn more than his counterpart in the UK, Sweden, Holland, France and Finland. Bigger economies, which are presently bailing us out. And An Taoiseach will still be earning more than double the salary of the prime minister of Spain, which is subject to a bailout of sorts, but which has an economy 10 times bigger than ours and a population 8 times greater.”

A bit of a laugh really!

Who is fooling you?






4. ecbwp1528

5. Reich, Robert B. (2012-09-04). Beyond Outrage: Expanded Edition: What has gone wrong with our economy and our democracy, and how to fix it (Vintage) (p. 31). Knopf Doubleday Publishing Group. Kindle Edition.









Black is white COCOS

January 20, 2014

Falling Loan to Deposit ratios

Falling Loan to Deposit ratios

It should be interesting to observe the results of European stress tests on banks in 2014.

According to Christopher Thompson of the FT, there is a “Flood of higher risk EU bank bonds on way”(1):

Thompson quotes:

“Last year Europe’s banks issued $19bn of Tier 1 bonds, a nearly fourfold increase on 2012 and the highest figure since 2009, and $77.1bn of Tier 2 bonds, a 19 per cent year-on-year rise and the highest amount since 2008.”

“We expect record issuance in Europe of Tier 1 and Tier 2 bonds for banks to meet
their minimum capital requirements – something between €30-40bn would be
manageable,” said Antoine Loudenot, head of capital structuring group at Société

Bonds issued before the currency crisis that no longer fulfill regulatory requirements will have to be replaced with riskier and more expensive bonds costing the European banking sector more.

“Holders of Tier 1 and Tier 2 bonds sustain losses ahead of senior bondholders in the
event of a bank default, and get paid higher interest to reflect that risk.”

Thompson has got it right. Its possible the ratings agencies will lower the credit rating of the EMU on the foot of these policies. Risk of Australian banks through subordinated bonds of imposing creditor bail in has already led to downgrades there.–PR_281378

“Sydney, September 05, 2013 — Moody’s Investors Service downgraded the subordinated debt (Lower Tier II) ratings and selected junior subordinated debt (Upper Tier II) ratings for the Basel II compliant securities of eight Australian banking groups. The banks’ senior obligation ratings and their stand-alone baseline credit assessments were not affected.”

The irony is the methodology to impose greater credit security for European banks allowing European banks to pass regulatory stress tests under Basil 111 for 2014, will allow them to pass stress tests, but at the huge cost of  weakening of the overall European banking sector.

If Moody’s acts according to its Australian template, expect European bank ratings and European national ratings to decline further. Growth in Europe is the only way out of this self-perpetuating decline vortex. There is little to show on the periphery or in the core eg in Italy or France of the kind of economic growth  required to save the euro from slow decline.

According to Thompson, “Much of the recent issuance in European banks’ subordinated debt has been done using contingent convertible bonds, or cocos, which offer attractive yields on banks such as Barclays and Credit Suisse but are considered riskier investments. Coco investors can have their investment turned into equity or wiped out entirely if a bank’s capital falls below a pre-agreed level.”

What Is a Convertible Bond?
As the name implies, convertible bonds, or converts, give the holder the option to exchange the bond for a predetermined number of shares in the issuing company. When first issued, they act just like regular corporate bonds, albeit with a slightly lower interest rate. Because convertibles can be changed into stock and thus benefit from a rise in the price of the underlying stock, companies offer lower yields on convertibles. If the stock performs poorly there is no conversion and an investor is stuck with the bond’s sub-par return (below what a non-convertible corporate bond would get). As always, there is a tradeoff between risk and return. (For more insight, read Get Acquainted With The Bond Price-Yield Duo.)”

It would appear Cocos are to be the new European equivalent of US treasury bonds. Perhaps this is a G8 method of structural stabilisation of the euro by providing a means for global investments including investment instruments across forex foreign exchange markets to prop up the euro. Its benefit would appear to be short-term gain against long-term risk.

Wheels are being greased to allow for cocos. Italian and dutch banks prepare to sell riskiest cocos. Investors will be rewarded with higher rates of return 6-8 per cent. But if the deck of cards topples their investment could be burned by bail in.

Cocos would appear to be the means by which those at the casino tables already burned in the high stakes game, are recapitalised in order to play for riskier and higher stakes.

According to Aimee Donnellan, “Under the Basel 3 framework, banks can raise 1.5% of their 6% Tier 1 capital ratio in the form of non-dilutive equity-like instruments, which can also be used to improve banks’ leverage ratios.”

Following UK, Spain, Italy have now raised investment in these instruments as tax-deductible.

“This work appeared to pay off on Monday when the Italian government prepared an amendment, to be inserted in the 2013 budget law, to make it easier for banks to issue hybrid bonds to boost their capital starting from next year, according to a document seen by Reuters.”

There is no doubt the financial casino of shadow banking in order to ‘regulate’ itself more is doing so in a manner that increased tax avoidance for the rich, makes attractive investment strategies that are riskier, reduces regulation while appearing to increase regulation, induces instability to prop up stability in the banking sector.

The world of shadow banking now paints black COCOS white.



Commercial Sensitivity

January 12, 2014


I listened to a couple of broadcasters from RTE some of whom sounding genuinely surprised our venture into the market place had been such a success.

Aware that there was some irrational euphoria about on our exit from bailout, even neoliberal broadcasters were at a loss to explain Ireland’s bond sale success.

The clue to understanding lies in losing the notion that Ireland retains any semblance of democratic sovereignty consider instead Ireland as no longer independent but a transformed satellite of the EMU with protectorate and/or dominion status run by a rich circle of golden insiders.

“A relationship of protection and partial control assumed by a superior power over a dependent country or region”.

Governments acts in the role of sheriff of Nottingham debt extractors for the troika and in return it maintains its financial perks of salaries and other benefits that go with the trappings of power. Its right-wing neoliberal agenda much like a south American banana republic has seen its interests join with the financial sector in looting the economy. Democracy has become a deficit and casualty.

Markets consider the bailout of Ireland by the troika comes from money the ECB can borrow and owe to itself much in the way Japan with its debt/gdp ratio hovering at 212% borrows a large part of its debt from itself; Ireland is carrying out the austerity programme demanded of it by the troika.

If Ireland did not have de facto protectorate status, it would be in an Icelandic situation and probably better off as a result.

What gets protected in Ireland is mostly the status quo who got us into this financial mess. They are still on the take. Compliant with the austerity driven bailout, they endorse and execute as invisible bailiffs the looting of public services.

Gone are the days of the EMU as a credit union with equal rights shared among members. We have a new monetary union with Germany and inner core towing delinquent members in a union that fails to work.

Similar to a Latin American type of political hegemony of countries wedded to the dollar the European union with its satellites in order to keep its power elite in a dominant position, find politics lurching far to the right.

The lurch to the right

Lets look at an example by choosing the lens to look through that of Ruairi Quinn TD Minister for Education and Skills. No better example of this exists than the case of the Irish Labour Party.

The Labour party instead of defending the people against the financialisation of our economy and its subsequent looting of taxpayers, has betrayed its roots and under the pretext of reform and saving the state, has become a component of right-wing neoliberalism for which control of the public sector has been secured with a dismantled public sector as its main agenda.

A favorite tool of the neoliberal agenda is the term ‘reform’.

Whether it be ‘reform’ of the health sector through the dismantling of health services; or the ‘reform’ of the Junior Certificate through increasing class sizes, doubling the workload of teachers; or deregulation of education through the abandonment of standards measured by state exams; or culling of jobs in both sectors, all point to ‘inefficiencies’ that are being addressed by the destruction and running down of democratic achievements in health and education.

The running down of the health and education sectors in Ireland is the new norm.

Workers in the health and education sectors can tell you at first hand how services are being run down, how their jobs are being made more impossible and difficult to carry out, how their sectors are in a state of massive decline under austerity. Politicians in bailiff/bailout parties will tell you otherwise.

The scandal of the privatisation of state services, a new neoliberal public policy agenda, sees taxpayer money funneled upward to pay bondholders and the troika. Into the breach has stepped the private sector willing to pick rich picking opportunities. There is increasing private sector involvement in education and health.

Both a health and education deficit sees more and more private sector involvement stepping in to collect from those who are able to pay. State services from which we all benefit continue to deteriorate.

School Books Rental Scheme Fiasco

The latest Labour Party fiasco introduces a school books rental scheme nationwide among primary schools throughout the country. But the devil is in the detail. Many schools with hard-working enterprising managers, parents and staff who, in the absence of such a scheme, put in place their own scheme in past years, will be excluded from the new scheme.

You may wonder why this is not being challenged in court as we are all supposed to be equal under the constitution. It appears if you are enterprising, you are not equal, expect to be discriminated against by Ruari Quinn TD..

Recruitment to the teaching profession is at an all time low. Changes in curriculum at the Junior Cert level disguise the looting of the educational resources in this sector as it becomes starved of the public purse. Teachers in keeping with removal of external supports by way of curriculum development and state examinations, are forced to develop the curriculum, set examinations and manage certification.

With added punishing work loads teaching overwhelmed with administrative duties, suffers. We should expect standards to fall with knock on effects in our universities. Older teachers with valuable teaching experience retire while a new cohort of temporary contract workers provide the band-aid to a sinking profession with sinking standards.


Hedge Fund to hedge school

Ireland is like one of those internet based hedge fund stocks bearing only a loose relationship to the real economy. Their share price is held in place by hot air bubbles of speculation lifting the financial worth of the stock. Not unlike the 2000 internet bubble, but stable enough for investors to reckon the country will prevail protected by the acolytes and protectors of ECB  bondholders; the bet is the country will not be left for dead and at a loss should things unravel.

One could also argue the recent successful bond sale was born out of irrational exuberance that Ireland had helped itself to austerity and had successfully exited its bailout.

Such are the levels of media propaganda and education by media of the public on financial matters, many members of the public are of the view that we have paid back the €67 bn of bailout and that austerity has ended. Indeed government has fueled such disinformation by suggesting tax cuts for the next budget.

It was no coincidence the government through the NTMA chose to go to the market place shortly after our exit from bailout.

Ruari Quinn TD in return for this state of affairs awaits promotion to the office of EU commissioner.  Charlie McGreevy was made the European Commissioner for Internal Market and Services in recognition of his contribution to the financial meltdown of Ireland. So Quinn for trampling on the democratic left and upholding of the right-wing neoliberal agenda to cocoon Ireland in a web of debt extraction disarming its educational system, should be offered similar job soon.

Commercial Sensitivity

Question any of these arguments regarding the privatisation of health care, education, the environment, water charges and a myriad other charges for public services you thought were paid in your taxes, and you come up with the problem of commercial sensitivity.

The private financial sector is not only loosely couple with regulation, but it cloaks itself like the Borg and has made itself immune from regulation and scrutiny. NAMA, the banks, Irish water scandals, each throw their hands up into the air and declare ‘commercial sensitivity’ when some regulator or inquisitive person acting on the public’s right to know wishes to examine the financial sector.

Lets have a look at how the ruse of commercial sensitivity works from the top of the shadow banking financial sector down.

Hedge funds across the world have become an extremely popular form of investment for the super rich.

In 2009 estimated size of the global hedge fund industry was US$2.4 trillion. Steven A Coen rose from a simple options trader to found SAC Capital with a track record 60% a year profitability, multi-year profitability. The FBI are concluding a year-long investigation of this fund under the heading of insider trading. Enough prima facie evidence exists to show insider trading by a golden circle is endemic throughout the hedge fund industry.

“Hedge funds are made available only to certain sophisticated or accredited investors and cannot be offered or sold to the general public.[3]As such, they generally avoid direct regulatory oversight, bypass licensing requirements applicable to investment companies, and operate with greater flexibility than mutual funds and other investment funds.[4] Hedge funds have existed for many decades, but have become increasingly popular in recent years, growing to be one of the major investment vehicles and sources of capital in the world.”

The truth is Ireland got its bailout by being transformed into a Hedge Fund. Most hedge funds are held aloft by speculation/investment in the large part. Loosely coupled to the real economy Hedge funds can be manipulated by disinformation or even fraud.

In a classic economy playing its role in the real market place Dubai politicians would have coughed at the notion of investing in Ireland with its current ratings. A debt to GDP of 124% with employment hovering around the 13-14%, massive emigration, huge levels of commercial and private debt, would lead markets to assume Ireland was a basket case.

Instead markets have taken a benign view of our economy. Ireland is seen within the safe harbour of the EMU. The troika is bailing out this economy but is also extracting wealth from it. Some of those interested in purchasing Irish bonds may already be the lucky recipients of bond payouts by Ireland. Perhaps the most compelling reason for Ireland’s foray into the markets is the fact that the EMU is seen as paymaster of this economy and, for now, the euro is seen as safe.

If Ireland gets into difficulties, markets reckon the troika will bail out this economy again and their money is safe. The only problem with this scenario is that Ireland is no longer a sovereign economy. IT now resides as a forlorn puppet economy of the increasingly politicised EU in some outer poor boy’s club anesthetized by its EMU paymasters, safely defused with its puppet politicians happy bailiffs of the troika. Its also wedded to a programme of austerity decoupling Ireland from financial independence and leading to a spiral downward.

Ireland can look forward to an anemic future as it tries like Germany after Versailles or the Philippines after its return of colonial tariff to the French, through growth to pay back its odious debt. However, Ireland’s hedge fund managers do not see it quite that way. For them the lure is to attract in further investors to drive up investment and employment.

So, how does a hedge fund work:

“A hedge fund is a pooled investment vehicle administered by a professional management firm, and often structured as a limited partnershiplimited liability company, or similar vehicle.[1][2] They are usually distinguished from private equity funds, which use the more illiquid investment strategies associated with private equity. Hedge funds invest in a diverse range of markets and use a wide variety of investment styles and financial instruments.[2] The name “hedge fund” refers to the hedging techniques traditionally used by hedge funds, but hedge funds today do not necessarily hedge.[3] Hedge funds are made available only to certain sophisticated or accredited investors and cannot be offered or sold to the general public.[3]As such, they generally avoid direct regulatory oversight, bypass licensing requirements applicable to investment companies, and operate with greater flexibility than mutual funds and other investment funds.[4] Hedge funds have existed for many decades, but have become increasingly popular in recent years, growing to be one of the major investment vehicles and sources of capital in the world.[5]

There is of course the political partnership between the troika representing bailout lenders, the IMF, EU and ECB in turn protecting the vested interests of the banking sector/financial sector.

There are the native banks in Ireland. There is the asset base of the market economy in Ireland within the public sector. In all there is the dominance of the financial sector with  puppet politicians and hegemony of a golden circle out to conserve and protect their own interests in the service of the new Irish economy built upon the sands of the EMU financial sector.

Unlike a typical hedge fund the Irish economy is now heavily regulated to protect the assets of its owners. However, insider knowledge used in betting the derivative markets in short and long investment strategies by Coen of SAC, see above, are also critical in maintaining a good result for bonds based on this hedge fund. It’s crucial for buyers to know that Ireland will be maintained financially in order to buy into this fund.

Its less a matter for investors that the Irish economy should show signs of growth, than the belief the Irish economy will not be allowed to fail.

Austerity marks the Irish economy for the deep freeze its investors will expect to ensure taxpayers in Ireland be made to make their full return to their investor funds. Expect to see higher taxes and lower quality public services looted to be fed upward to the owners of the Irish hedge fund.

Do not expect the top 1% in Ireland to make their contribution to the IHF(Ireland Hedge Fund). Taxation will mean less tax for the rich or no tax with accountants hiding profits under capital gains tax or other tax devices to lessen their bill.

High earners in the MNC’s will be protected as government is lobbied and controlled by their financial representatives. Bankers on high salaries, bonuses and perks will be protected from austerity also.

Austerity will fall on the lower paid, on a looting of public services through cutbacks and other downgrades to Ireland’s infrastructure.

The shape of economies such as Ireland, Portugal, Greece dominated by the leveraged buyouts of large bailouts is anemic at best, absurdly misshapen at the worst.

The reality is a golden circle guarding the interests of Ireland’s hedge fund managers who run the show. They use ‘commercial sensitivity’ to hide from prying eyes.

It would be easy enough to address this. The appointment of one of our retiring judges to scrutinise documents on our behalf could decide whether charges should be brought in open court, or whether illegalities have taken place, or other investigations require to take place.

While the banking and financial sector are becoming more dominated by the values of the hedge fund and the financial markets, decoupled from scrutiny and regulation, those of us remaining who cling to democratic values, await patiently our banking inquiry. 

Debt Clock

It’s useful to study the emergence of the hedge fund as it mirrors the corrosive nature of the financial sector over the past 20 years. See 1 below.

“Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields. “

Maybe this notion has to be revised to include, it matters who the debt is owed to.  If the rich daddy is the ECB, well that’s a different matter.


Nama Republic

January 1, 2014

There are a slew of legal actions from developers fighting NAMA through the court system. This was expected by those who cautioned against the setting up of NAMA in 2009 eg. Here are some. Expect more.

“Central to proceedings is the developer’s bid to have Nama’s appointment of receivers to 36 of its prime Irish property assets overturned.

In taking the case against the State’s so-called ‘bad bank’, Treasury is, according to sources familiar with the matter, prepared to do everything within its still-considerable power to secure victory, and in the process expose what it sees as Nama’s “misleading, unreasonable and entirely unacceptable” behaviour in relation to its business.”

Awaiting an upturn in the Irish economy - geog...

Awaiting an upturn in the Irish economy – – 1734903 (Photo credit: Wikipedia)

Meanwhile sales of large property portfolios are ongoing at NAMA.

According to Peter Flanagan, Sunday Independent, Dec 1, “A slew of international bidders, including some of the top US funds who specialise in buying so-called distressed debt are believed to have made first round bids for the loan books, known as Project Rock and Project Salt.

Project Rock is worth about €7.8bn in total, but a little over €2 bn worth of those loans - mostly UK commercial real estate – are up to date and are expected to be refinanced by the borrower. That leaves more than 5.5 bn worth of loans that are in arrears.

Project Salt, meanwhile, is made up mostly of Irish commercial property loans, with close to €2 bn worth of lending that is now in arrears.”

Now that Ireland has been sent into cryogenic stasis through its odious bailout, it would appear international vulture funds are ready to make a killing on the Irish property market.

Along with an increase in property prices in Dublin over the past year,  a mini property boom in Dublin, this has attracted vulture funds  into the Irish commercial property market believing the market has bottomed out. They are ready to takeover at knockdown prices the pyramids built by failed Irish property developers.

This state of affairs has not been achieved without some cost. The Phoenix project below, check out website for articles and stories surrounding the 200,000 mortgages in distress currently. The recent personal insolvency bill has given precious little relief to the vast majority ensuring that mortgage arrears and loan default has still not been addressed satisfactorily by Irish banks.

The Irish property market remains severely distressed. The extend and pretend maxim has given ballast to the view there is a small recovery in the property sector. The extend and pretend maxim of the banks works hard to hand out propaganda to all sides that the balance sheets of the banks can be made good.

Thus letters sent by banks to commercial buy to let defaulters signifying no more than the banks want their money back allow the banks to pretend loan resolution is in progress. The reality is a large part of the loan book of Irish banks is in distress and the banks refuse to mark down realistic losses.

Hopefully in 2014 stress tests on Irish banks will reveal this truth.

A large effort is underway to deny the truth. In Ireland austerity has paved the way for deflation helped by banks not lending coupled with the onerous and odious fact that given Ireland’s cocooning in the euro, unable to devalue its currency, lack of inflation with its debt burden  growing not diminishing as a result of this, investment in the Irish economy is becoming more burdensome.

By not facing the truth of debt write down/burden sharing, those in default suffer by not having the reality of their circumstances dealt with realistically by the banks. Repossession would leave the banks with a problem of selling on distressed assets. The property market  would see a further collapse in values if its true worth were tested in fire sales.

With extend and pretend Nama benefits,  banks benefit,  enabling them to set  benchmark on property prices pretending doubts about the asset base of the banks are doubts without substance; vulture funds benefit, by seeing their investment yield a return.

Local business investors and the retail sector find it more difficult to pay the scalping rent and property procurement prices, find themselves  driven from the market. The retail sector is put under further pressure.

There can even be a small mini boom  prices as a result of the NAMA and bank induced coma of the property sector.

The euro has acted like a boa constrictor for the Irish economy. Because the bailout of €67 bn given to the Irish economy is backed by the IMF and the EU and ECB Ireland is subject of a leveraged buyout that can send the Irish economy into a state of permanent stasis.

Any doubts that we received back our economic sovereignty should be banished.

The Poisoned Well

More doubts about the manipulation of property prices by Nama surfaced last Sept:

According to Daniel McConnell/Ronald Quinlan,Roisin Burke, 22 Dec, Sunday Indo
“Nama bosses Frank Daly and Brendan McDonagh have come under fire from Fine Gael’s Eoghan Murphy of the Public Accounts Committee about the agency’s decision to take a 20 per cent equity stake in the €800m Aspen property portfolio, which it also provided the finance for.” “Labour Senator Lorraine Higgins claimed a senior government figure attempted to gag her on NAMA.

One concern is NAMA is setting inflated property prices, it may provide the finance to a private company, it takes an equity stake in that company, so smoke and mirrors, it sets the selling price and is first buyer hoping others will follow.

The whole matter of withholding commercial and residential property from the market in order to avoid fire-sales, once again, the reader can draw their own conclusions.

The dead cat bounce represented by such business activity has many questions to answer. In spite of mortgage lending being down last November on this time last year, there has been a surge in the Dublin property market.

The source of financing for such deals would be worth investigating by the PAC(Public Accounts Committee) to eliminate the possibility of market price manipulation by Bad Bank NAMA.

But PAC have other concerns re NAMA. Darragh O’Brien TD  has said, “The case for a sustained public inquiry by the Oireachtas into NAMA is compelling. The volume of complaints being received across all parties is astonishing.”

In August 2009 a list of academics, economists, signatories appeared in the newspapers:

“We therefore urge the Government to reconsider its approach to payment for loans to be taken into Nama, to pay no more than current market value – which can be ascertained even in these times – and to require the investors in the banks to bear some of the cost of restructuring the system.

To do otherwise would be economic folly.”

Government ignored this advice and bondholders were paid off.

In 2009 regarding NAMA I blogged the point:

” An enormous amount of business critical information will be collected if it hopes to manage the toxic assets. The value of this information to interested parties ready to exploit it will be extremely high and sensitive. It could very well be like a sieve with a potential for exploitation exceeding our worst fears.”

A large turnover of staff in NAMA have been snapped up into organisations run by international investors. It’s not inconceivable that NAMA is leaking information like a sieve.

Here’s how the scam might work. You get a portfolio management position in NAMA - gains you access to a lot of information right across NAMA. You see what deals are being made, what sells, what doesn’t, pricing, evaluations. Such information is gold to international property fund managers. Gaining a NAMA man must be like being given a torch in a gold mine.

To be fair to NAMA, its difficult to assess whereabouts NAMA is at present in spite of recent newspaper reports raising doubts once again: it is so cloaked in commercial secrecy laws that virtually no Freedom of Information requests from journalists are allowed.

Sharing concerns re the high turnover in staff at Nama, the PAC recently entertained the chairman of NAMA to give assurances assuaging similar concerns.

Transparency is the key word here ! Who is going to regulate NAMA. How much information will be given, for example, of the developers, bank shareholder  investments, the evaluation procedures and  nature of the toxic assets under review?

Hopefully coming court cases will ascertain what journalists have been unable to find out.

We do need an inquiry to assess directly if the public are being safeguarded from bad procedures, mistakes, incompetence, abuse, corruption.

Perhaps the most curious issue of all will be the evidence offered in support of the value put on toxic assets by a so-called independent system of independent valuers !!

NAMA may keep property off the market because a fire sale would lower property prices! In this regard, the tax payers and the business people of Ireland get to carry the high cost of inflated property prices thus making us more uncompetitive and returning us to the bubble situation where even professionals could not afford the falsely astronomical prices of recent years.

NAMA currently has no remit to discharge its affairs in a time frame of one or 2 years, it’s a lot more longterm than that! Perhaps it ought to be broken up and chinese walls set in place to protect the interests of the public. Perhaps its disposal of assets are on the basis of the worst wine kept until last.

Realistic targets and goals should be set in place and monitoring should be introduced to regulate its performance and investigate its workings. Currently it would appear the only monitoring would appear to be the monitoring of a casino high roller in Las Vegas.

NAMA at tax payers’ expense will increase the profitability of shareholder stakes in the banks, wipe out the debt of developers, create a gravy train of administrative feeders on NAMA, and burden tax payers of generations to come with a mountain of toxic debt. Though it could yet still cost the banks dearly.

There is still the valuable full blown argument that the toxic assets should have been left in the banks. They still had the best business experience to deal with rogue developers and supposedly have learned from their mistakes. The banks could have dealt much better than NAMA could.

Nama pusillum

Nama pusillum (Photo credit: Wayfinder_73)

Instead a state bureaucracy was created with developers who ran their toxic portfolios into the ground now on the state payroll. Are you having doubts about the Agency’s methods yet?

Opportunity given to developers working for NAMA to abuse their position and benefit from insider dealing have surfaced in the McKillen case:

The main struts of Paddy’s case hinge on the following:

“1. Paddy’s loans aren’t NAMA eligible assets.

2. Paddy wasn’t given enough time to re-finance his assets

3. NAMA valuations are lower than Paddy’s valuations

4. To be associated with NAMA is damaging to your commercial reputation

5. NAMA offends the Constitution and EU rules with respect to property rights”

Added to above is:

An allegation that NAMA undermined McKillen by selling off property loans he was associated with to the Barclay brothers with whom he is in commercial dispute.

Chief Executive of NAMA, ” Mr McDonagh said he believed there had been “a carefully orchestrated operation” to damage NAMA and undermine the financial interests of the State.”

In the absence of full disclosure of its business model in all its aspects, its impossible to accept the existence of an “orchestrated operation”. So far NAMA has cases ongoing against two of its former employees for leaking information.

Of critical interest is 3 above. Depending how the property market returns, other developers may choose to follow suit. State legal costs range in McKillen to €6-14mil to be borne by the taxpayer.

NAMA as a Hedge Fund?

In many ways NAMA is a hedge fund gamble by the Irish government to lock in investors, the Irish Tax Payer and the Bond Holders who fund NAMA.

While the rest of the world is steering clear of this type of investment having learned from the mistakes of others, we seem to be prepared to go where others have become undone before us!!

According to the Agency it is now making significant progress on managing the €72.3 billion of loans it has acquired from the five participating banks and maximising the return for the taxpayer.

But the taxpayer has few tools to monitor, assess and evaluate progress. An independent inquiry by Ireland’s PAC has about as much chance of coming into being as an open inquiry into Ireland’s banking collapse.

To pin the detail and bring clarity to this, we need to insist on more information, not smoke and mirrors, on how NAMA is going to work.”

Corruption involves more than the misappropriation of assets, eg  monetary or property assets. When an institution the state is responsible for or the state itself becomes corrupt or incompetent, power itself becomes corrupt.

I listened ruefully to Stephen Donnelly on NAMA


“Basically, what this note is saying is: we have enough money to last us until the end of 2013. By the end of 2013, we hope to have found a way to go back to borrowing from the private sector. Until then, we’re ok. Under previous plans, there was only enough money to last us until mid-2013, so this means we have six more months to work on the country’s financial situation and come up with a solution.

€11,882 million: this is the amount of maturing debt that we need to pay back in January 2014. This is a big stumbling block. We have two years to find that amount of money – and to pay it off, Ireland can’t use its remaining assets at that stage, which would only amount to 10 billion euros. Besides, using them would mean we’d be left with nothing at all.

€67.5 billion: this is the amount we owe the EU and IMF, and it’s only part of Ireland’s huge outstanding debt, which is close to 200 billion euros. The problem is that, for a long time (as long as there was enough money to go around), European governments racked up debt instead of trying to balance their budgets.”

It is not feasible to overcome the debt situation with the range of financial disciplinary measures that will cripple the economy and kill the patient in order to cure the illness….

Raison d’être of NAMA and Ireland’s possibility to pay back its bailout at every juncture hinges on growth of 3-9%. None of these figures are achievable in the current climate in the euro zone.

External Deficit procedure and Fiscal Treaty Rules

Michael Andrew FF ireland-republic-of

Freedom of Information rules….NAMA not obliged to publish itemised accounts only an overall account  cost us €30 bn..You can see what is for sale on its website….opportunity for corruption is enormous… selling under the market price

Ireland’s Debt Profile

Credit Ratings    “

The Ratings

DBRS, Inc. (DBRS) has confirmed the Republic of Ireland’s long-term foreign and local currency issuer ratings at A (low) and maintained the Negative trends. DBRS has also confirmed the short-term foreign and local currency issuer ratings at R-1 (low) and maintained the Stable trends.

….. The IMF projects the Irish economy will expand 0.6% in 2013 and 1.8% in 2014. However, these supportive factors are balanced by significant challenges: the fiscal deficit is still large, the public and private sectors are heavily indebted, and the banking system continues to face deteriorating asset quality and weak profitability.

The Negative trend reflects DBRS’s assessment that risks stemming from the external environment remain skewed to the downside and that the expected primary fiscal balance in 2014 is still short of its destabilizing threshold. However, the trend could be changed to Stable, potentially in the near term, if there is greater evidence of a sustained economic recovery and fiscal consolidation remains on track.”

There are no signs of the kind of economic recovery that can make Ireland’s debt sustainability prospects more positive than negative.

Winter may see the dead cat bounce, but one swallow won’t make a summer.

Happy New Year.



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