Catch 22 !

October 22, 2015

How can it be one of the most heavily indebted countries in the world can be booming while the rest of Europe stagnates under deflation and Japanese like recession? Welcome to the world of fantasy economics where boom is bust, bust is boom!housing-crises

When times were a lot poorer in Ireland, government found the will and the way to build relatively sufficient corporation, county council housing estates that became affordable housing for the poor and lower middle class young people beginning families.

Large tracts of land south and north of the city were given over to these projects and the city and its population spread and grew over time.

At least families had a roof over their head.

Today so-called informed commentators scratch their heads baffled that government can’t or won’t build in the middle of an emergency homeless crisis? For example, Dublin City Council, which has a housing waiting list of 20,000, last February set out details of homes it intended to start building – about 750 between now and 2017 at 18 sites in the city.

Whether these will ever get built is another question.

Alan Kelly, minister for the environment has just announced a paltry 22 modular kit houses to be built before Xmas in Dublin. He should be building 2000 of these to make way for a greater supply to other segments of markets in the near future.

But if these are built and the price of property falls to reasonable levels, developers with loans in rent to let properties may see their returns fall and be unable to meet their debt repayment obligations. This in turn could bring down the banks. Catch 22.

So government is in league with the banks to screw the young people of Ireland and turn them into serfs, without property rights, indebted to developer landlords scalping their right to a home, forcing growing numbers into homelessness.

Game, set and match to developer landlords, vulture funds and the 1% who can raise rent at will to extort any profit margins they wish from an obedient and compliant government.

What has changed over the years to bring this unimaginable mess about? The origins of this debacle go back in time.

In 1971 the global currency based on the dollar switching from a peg on gold convertibility into a new fiat floating currency.(1)

From 1944 onward the dollar became international reserve currency pegged to gold bringing relative stability to world currency markets. Nixon intended the dollar’s removal from Bretton Wood’s would be a temporary measure.

Bretton Wood’s following changes would continue in its previous role anchor to global currency movements.

Instead, release of the dollar from its gold peg,  introduction of derivative based financial paper money vehicles for trading in bonds, the way was opened for those operating the financial markets in large banks and financial markets, to develop and play a global financial casino for financial markets.

Financial markets ballooned inflated with money printing through QE with trust evaporating while paper trails led to Enron to subprime markets in the US or to under the counter deals made with Greece.

Financial collapse came in 2008 though many argue this as mere precursor to what lies ahead.

Reforms through Dodd Frank have been piecemeal.

Fixing the financial system as practiced through the method of Quantitative Easing have exacerbated problems leading to a worsening situation for global markets now facing deflationary debt crises from Latin America, Asia (Japan now China). Yen and yuan and euro compete with each other in the race to the bottom through mutual devaluation.

QE printed money, gave it to large financial institutions, who poured it into stocks and shares that have heavily inflated their value similar to inflated property prices in Ireland’s housing and property bubble. Yields going forward appear to be on the precipice of collapse especially in china. On a global level a large reset would appear to be about to come into play and the euro is at risk.

Meanwhile banks through devious means have abused their power once again manipulating global commodity markets eroding trust and fairness and corroding the health of the global financial system. http://www.rte.ie/news/business/2015/0928/730777-swiss-investigation/

“Swiss competition authorities said today they were investigating UBS, HSBC, Deutsche Bank and four other banks on suspicion of price fixing in the precious metals market.

The Swiss Competition Commission (COMCO) has today opened an investigation against two Swiss banks, UBS and Julius Baer.

It is also looking at Deutsche Bank, HSBC, Barclays, Morgan Stanley and Mitsui, it said in a statement.”

Global debt ceilings have rocketed skyward, lower interest rates and currency devaluations fed by deflationary spirals have brought the world to a debt ridden cauldron where future development is benchmarked against impossible odds placed by debt repayment obligations, pension and social security obligations and growing demographic turbulence led by wars and a refugee crisis.

Negative interest rates indicate a collapse of interbank lending and collapse of the financial system.

http://www.nakedcapitalism.com/2015/10/negative-real-rates-signify-a-broken-financial-system.html

Deregulation of financial markets led to Property markets subsumed into a worthless counterfeit of paper derivatives gathered into large tranches by financial institutions and marketed and exchanged for what value can be sought..

Government response has been accompanied by a massive austerity transfer of wealth from poor and middle-income upwards to pay for losses of the 1% in the ongoing financial crisis.

As a result of financial meltdown, the rich have become richer and the poor poorer.

A fall in property prices could be the beating wings of a butterfly that will set off the storm of a massive downward spiral in the value of vulture funds, stocks and shares based on property.

Protecting the banks and the financial players means, for example, those cheap housing units will not be built in Ireland though they can be built by GOAL in Zimbabwe!

Low interest rates and cheap lending eventually the cause of massive bailouts has also led to the unfolding debacle of homelessness fed in turn by massive weight of debt built on property speculation. Both rents and property prices increasingly affordable only by the rich.

Part 11

In Ireland, repayments for bailout are being harvested though raids on public services and the pillaging of public utilities. Workers in the public services, gardai, teachers, health services are now being employed as temporary workers on lower pay scales replacing permanent, pensionable jobs on higher pay.

Government budgetary deficits allied to bailout reparations is used as a stick to renew the Celtic Tiger based on property speculation rather than real value vested in health and education and business enterprise.

In insidious, unsettling divide and conquer, young people find themselves hired into the public service, if they do find a job, its at half pay scales of their older colleagues.

Euro’s devaluation pain and deflation is Ireland’s gain: this boosts exports allowing exports sell cheaper abroad.

While this small island can benefit from such quirkiness of macro economics, the world’s potential for economic progress is at high risk of collapse.

The previous Breton Woods system needs to be revived to overhaul a global currency system no longer fit for purpose growing closer to collapse.

Currencies across Latin America, Asia  now the emu face devaluation and a race to the bottom.

The world’s global reserve currency, the dollar, lies fallow beset by massive debt.

The euro faces Japanese deflationary recession even if its refugee crisis is resolved.

Yet projections for economic growth range anywhere between 3 and 6% for Ireland next year.

Decreasing cost of oil, lower interest costs on debt and windfall for multinationals paying corporation tax posting a huge increase in euro based profit through their dealings in $. Ireland is told its booming.

Multinationals are for the most part dollar denominated in their trade with the rest of the world. The irony is the value of their dollars with the dramatic fall of the value of the euro against the dollar, has led them to post massive increase in corporation tax.

Not that they pay a lot to begin with Ireland’s rate of Corporation tax near lowest in the developed world.

Recent budget has protected multinationals from making  greater contribution to Ireland’s tax take ensuring, for example, multinationals pay virtually zero contribution to Ireland’s universities at the same time expecting them to deliver graduates of the highest educational calibre.

Further such windfalls to the exchequer depend on further falls in the value of the euro against the dollar.

Flushing the chain on the value of the euro on world currency markets makes Euro’s loss Ireland’s gain!

How ironic.

Part 111

Egregious saving of the Irish banks and the Irish financial sector by government has been at the expense of outright pillaging of Irish public services.

Emigration and falling employment standards have been accompanied by a massive transfer of wealth from the poor to pay interest to foreign bondholders in German and French banks on foot of a €67bn bailout the bill for which is paid for through austerity.

Property speculation that led to Ireland’s financial collapse has been restored to its former glory as a means to speculate casino wealth for property developers and investors in financial markets many of whom are in ministerial positions in government acting as guardians of their nest eggs.

Homelessness is a key result of central government’s failure to build sufficient and affordable housing to deal with a growing crisis. According to government, the money is available, they point to the failure of local authorities to act.

Most of us know if we have the finance, we can build. So let’s call this a lie.

Vast tracts of Dublin await action on development funding and these areas can be moved into action fast to fill up housing shortfalls. However, inaction has dissected the problem into many parts with the view to obstructing and obfuscating solutions that are obvious.

Government has cheerleaders who see their borrowings return to profit.

Artificially created shortages generate further profit for this group. It is their key concern not to bring about affordable housing, but to protect their profit margins.

Behind government are large institutional groups who’ve bought into the Irish property sector and wish to reap large rewards in controlling the rental sector.

Large vulture funds have also come to play welcomed by NAMA who’ve sold them large slices of the Irish market against the more prudent way forward of dividing and allowing competition to flourish among Irish bidders.

NAMA, having played a distorting role in the property market, is touted as its possible saviour as future provider of construction projects. The fox is being put in charge of the chickens. But no development expertise or experience except in the financial area, this is no barrier for such government led fantasy.

Meanwhile there is reported discord in cabinet between Alan Kelly and Michael Noonan.

Noonan’s voice is one of caution against imposing rent ceilings that would drive out and dry up the rental sector.

Noonan should also be seen as a point guy for the banks who applaud the return of high property prices ensuring negative equity and the future return of their lending is safe.

Who can imagine anyone getting out of the property business with the present levels of profiteering available, but there again for the most part you don’t have to be very intellectually endowed to do what you are told by those who manipulate puppet strings in the financial sector.

Let’s just say Alan Kelly has failed to address problems in the property sector and leave it at that.

Faced not only with Irish Water, homelessness and shortages in the Health service, other problems have emerged for government.

Web Summit co-founder Paddy Cosgrove ran into a brick wall in trying to get An Taoiseach’s department to deal with practical issues such as a specific traffic plan, controls on hotel rates during the Summit, a solution to WiFi issues at the RDS, discounted public transport for attendees, and garda escort services for approximately ten VIP guests.

Instead of dealing with practical concerns above, it would appear the Taoiseach having scored a goal in having the web summit in Dublin, took the ball from the opposition’s net and made his way back to his own goal, where he deposited the ball and lost the match.

As is the norm in such circumstances this match was lost much further back in time.

Growing dictatorial power of this Taoiseach FG/LB government and their grip on business and financial dealings in general are mounting.

Through Ireland’s economic management committee of Kenny, Noonan, Howlin and Burton any stamp put on Ireland’s future by its current and erstwhile European management team of Angela Merkel, the EU and the ECB, will be well licked.

In return, Kenny in his leadership of this team expects subservient and blind obedience in return.

It’s a cause for concern both Dublin and Cork Chambers of Commerce are both finding their powers eroded into the hands of central government. Dublin needs an independent mayor with powers similar to those of Boris Johnson, mayor of London.

The development of Dublin should not be left in the hand’s of An Taoiseach’s office.

The city of Cork also fears amalgamation of city and county and erosion of its power to address the needs of the city it is best qualified to address.

Open letter here:
http://thecork.ie/2015/09/20/cork-lord-mayor-is-against-merger-of-city-and-county-councils/

Compliance and obedience and silence on a critique of the powers that be however inadequate and incompetent they may be, it would appear the message was lost on Paddy Cosgrave and he took his business elsewhere.

Signs of this transmogrification of Ireland into a banana republic increase by the day.

Homelessness and crime are on the increase. Propaganda proclaiming the happy hour of growth and recovery based on government policy not due to external factors beyond our control, is rife.

Government is becoming more right wing and centralist, the rich are becoming richer and the poor are becoming far poorer with policies that extract more from the 99% to give to the ‘recovery’ of the 1%.

Key services such as health and education are both starved of funding the quality of Ireland’s health service continuing to deteriorate with acceptance by those in government that a trolley based service over the winter months is on the cards.

 

Postscript

 

Ireland’s fantastic Four of Kenny, Noonan, Burton and Howlin in government have failed the political mandate given to them by the people who elected them to harness their new abilities and work together to save Ireland from former friends turned enemy, the financial sector and the ECB.

Rather they have become the unwitting pawns of the ECB and financial sector in the transmogrification of Ireland into a closed protectorate where democracy of the Abraham Lincoln kind is perceived as a threat rather than a badge of honour.

Enda gave us an early Xmas pantomime opening the possibility of an early November election with soothsayers like yours truly proclaiming ‘look behind you’ to 1995 and 1997 that election date would be better held on April 1.

The mess caused by such useless speculation threatened the outcome of the toothless banking inquiry.

Added to the mess of the water charges white elephant and lack of progress in dealing with the housing crisis, disastrous state of our health service, the people will take all of this into account, when they get to vote.

Iceland has sentenced 24 bankers to combined 74 years in prison. Ireland is a haven for bankers and is no Iceland.

http://usuncut.com/world/iceland-sentences-26-bankers-to-a-combined-74-years-in-prison/

till again

(1)
https://en.wikipedia.org/wiki/Nixon_Shock
http://www.investopedia.com/terms/b/brettonwoodsagreement.asp

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