Béal na Blag !

August 23, 2012

As the euro sinks against the dollar currently in the $1.2+ band from a high of $1.45+ not long before it fell to similar lows in July 2010, the most damaging effect of this, for EU members, is the growing cost of oil imports (1). We spend on oil what we could be spending on goods and services, that ultimately means job losses.

The days, when countries like Iraq threatening to switch from the petrodollar to the eurodollar, have long gone, the dollar now reigns supreme though damaged through its own debt woes.

When oil was discovered in large quantities in the Middle East, it took many years for the Middle East to realise its new power. In 1963 OPEC was established (2),”The Organization of Petroleum Exporting Countries (OPEC) was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela primarily in retaliation for price cuts made by oil companies.”

OPEC flexed its economic might following the Yom Kippur War, to protest US support of Israel, retaliating, raising the price of oil and for a short time, it even withheld supplies to the US.

Crucially OPEC had already made a deal with the US to use the dollar as the exchange currency used for the purchase and sale of oil.

In return the US promised and supplied military aid to eg Saudi Arabia securing protection and defense and support to regimes in the OPEC states. On their part, OPEC states used the dollar and deposited dollar profit in the FED, expanding the supply of dollars, thus providing an unlimited credit card to the US.

Dollars were leant out to the rest of the world requiring both oil and dollars to denominate the growth of economies.

When Japan wants to build cars, it needs to buy oil to build its transport and infrastructure. It borrows dollars from the FED to buy the oil. Cars are built and sold to the US. Dollar bills are used to pay for the cars. Japan takes these bills and gives them to OPEC to pay for more oil. OPEC deposits the dollars back in the FED.

For example, 70% of the wealth of Saudi Arabia is deposited with the FED. This is called petro dollar recycling.

In the currency wars surrounding petrodollars, its not an insignificant fact that the decline in value of the euro against the dollar is a large component in the extra cost of energy contributing to the euro’s woes and its decline.

Like all member states of the EMU Irish energy costs are on the rise again and contributing to Irish woes. Add to this bad grain harvests across the world and the rise in the price of commodities eg food. Ireland faces a perfect storm ready to sink its prospects of escaping its banking crisis.

A not inconsiderable negative factor in favour of Ireland’s negotiation of these troubled waters is a political leadership bereft of vision for which blagging is currently the favorite response towards resolution of our debt crisis.

Some economic commentators place the responsibility for our woes at the foot of the ECB ! Jean Claude Trichet is a favorite target of some popinjay politicians and economists who ‘tut, tut’ the alleged enforcement on Ireland of terms of its bailout that protected senior and subordinated bondholders when haircuts should have been imposed as they have been in Greece. Trichet has to carry blame for our economic woes, but Irish politicians are not untainted and should be fair game for critics in the blame game.

Au contraire mon ami, our Irish politicians worked hand in glove with Trichet lecturing taxpayers on the need for Ireland to save Europe from the domino effect that has seen the markets turn, in spite of our ill judged wisdom on economic matters, against Portugal, Spain, Greece and Italy. Unfortunately, due to the lack of a banking inquiry and the lack of Freedom of Information documents hiding these issues and those responsible, its not possible here to give more than informed opinion on these matters, rather than the documentation we require.

One of the definitions of the word ‘blag’ is “1. to obtain by wheedling or cadging eg she blagged free tickets from her mate”(3). Like a female praying mantis its front legs folded in supplicant prayer ready to be devoured by its mate, Ireland now awaits the long resolution of its debt crisis in the coming months, October onward. At stake is over €67 bn of bank debt the ECB has forced on Ireland as misnomered ‘bailout’ to repay unconscionable bank debt bequeathed to us and to our children through our governments ill fated bank guarantee. Surely the most ill advised decision Tir Na N’ÓG decision in recent economic history in the western world for any government? At its heart a cool €31.6 bn of debt repayable through promissory notes currently ransacking the Irish economy with annual repayment levels of €3bn + that sink any prospects of Ireland’s return to the markets and economic self governance.

Fluffy speeches by An Taoiseach that demean the legacy of independence handed down by Michael Collins at Béal na Bláth(4)hold little promise a negotiation of bank debt amounting to less than a ransacking of the Irish economy by the EU and the ECB is on the cards. Rhetoric sounding triumphant and pleased with its goal to take the subject of Ireland’s debt woes off the agenda and park it out of the way under some stone in the future, replaces action that brings resolution and action into the here and now.

Our independence has been compromised and we’ve become a Blag state wheedling from our lenders unsuccessfully, the only success being we’ve held onto power and blagged and squandered the fortunes of our young while forced to emigrate as our businesses go under. There are no jobs.

According to Moody’s who do not believe in our bailout and who favour a post-bailout programme(Irish Times Aug 23 Business & Technology) of indeterminate scope (the mind boggles, why not a ‘post’-post-bailout programme for more certainty:-) ), our bonds remain at junk status.

Our banks, circa 11% or mortgages currently in arrears of more than three months, represent a tsunami of debt that will require further write down, provide the blagging backdrop to new amortization bond programme of the Irish government. Lets not leave aside and park the probability the only interest in these type of amortization bonds, where interest and principal are paid off in annual increments, as opposed to the more standard type of bond where the principal is paid off at the end of the bond period, comes from Irish pension funds.

One is left with the distinct probability that once again Irish pension funds are being raided to backstop our national debt. Proof of an NTMA return to market with the successful sale of these bonds to Irish pension funds must bring a smile to the cognoscenti who note further alarming risk to Irish interests instead of the propaganda of ‘successful return to markets’ that will be promoted by beleaguered and beguiled Irish policy makers.

Surely the purchase of Irish government bonds by the ECB would be more in our interest? Who else would buy them?

Let’s put the nonsense aside and return to blagging our debt with the ECB alongside An Taoiseach, Enda Kenny? Will he succeed in having our debt written down over the coming months? No.

Eventually blagging is either successful or unsuccessful, its a boolean, yes or no. The Irish Credit Union part of the larger European Credit Union instead of amalgamating with Germany, which has taken our economic sovereignty through its ‘promissory’, amortizing, debt relationship, bleeding Ireland into a praying mantis relationship form. This is far from the ‘community’ of sovereign nations that was part of the original vision of the EU. Reamalgamation, under a new Commonwealth flag, to further the progress made with sharing our destiny with Northern Ireland and the UK, in recent years, should seriously be considered!

As Irish politicians and economic and financial luddites line up to flag our new amortization bond sales, perhaps a more humble and informed and responsible approach to our national debt issues is required from those interested in furthering our interest in these matters.


Addendum August 26

Yes, papers today are full of the mysterious letter sent from ECB to Brian Lenihan with threats none days before bailout that Ireland would be refused ELA funding from the ECB if it did not capitulate to the unconscionable terms of the bailout. Folks, take it all with a grain of salt. The truth is Irish Dept of Finance and the shadow decision makers not yet rooted out by a banking inquiry into these affairs because we havn’t had a decent inquiry, are attempting to absolve themselves of responsibility for the worst sell out of a nation since In 1830 US Congress passed the Indian Removal Act.

Europhiles at the time of the bailout hailed the bailout as a success: http://www.bbc.co.uk/news/world-europe-11855990

“Irish PM Brian Cowen said it was the “best available deal for Ireland”.

It provides “vital time and space to successfully and conclusively address the problems we’ve been dealing with since the financial crisis began”, the prime minister said.

Details of the 85bn euro plan include:

      “an average interest rate on rescue loans of 5.83%


      the 35bn euros allocated to Irish banks is divided into 10bn euros for “immediate recapitalisation measures” and 25bn euros as a contingency fund


      the Irish Republic itself will contribute 17.5bn euros to the overall fund


      the EU will contribute 45bn euros, including direct bilateral loans from the UK, Sweden and Denmark


      the IMF will contribute 22.5bn euros


      allows the Irish Republic to delay by one year to 2015 its deadline for reducing its budget deficit to 3% of GDP.


    The Irish government has also said that interest payments on all state debt will account for more than 20% of tax revenues in 2014.”

Critics of the deal heralded triumphantly as Ireland backstopping and preventing contagion in Europe, were rounded on as naysayers.

The Irish government fell over themselves in efforts to comply.Growth rates of 3% were factored in in the propaganda wars supporting Nama and ‘bailout’. In truth ttaxpayers were being bailed in by Irish negotiators and the troika to pay for the mess.

Realistically Ireland could have exercised enormous influence on Europe’s need to protect itself. With intelligence, diligence and negotiating competence, we may not have squandered the opportunity to get a better deal, better than the unconscionable sell out of Ireland – blame for which is unfairly being leveled at the ECB alone.




(3) http://www.thefreedictionary.com/blag

(4) http://www.independent.ie/opinion/editorial/fine-words-dont-do-collins-justice-3203790.html


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