Commercial Sensitivity

January 12, 2014

myWeeDerivative
Surprise

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.

http://www.thefreedictionary.com/protectorate

“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.

chart

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.

http://www.pbs.org/wgbh/pages/frontline/to-catch-a-trader/

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.

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

“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: http://en.wikipedia.org/wiki/Hedge_fund

“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

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

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.

End
http://aida.wss.yale.edu/~shiller/behfin/2002-04-11/brunnermeier-nagel.pdf
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