Jan 242012
 

The IMF is now saying that small countries shouldn’t be rescuing the European banking system on their own and that the EU as a whole should step in to deal with failed institutions.  That’s a bit late for us.  It was obvious to anyone with eyes in their head that it was a European problem, and not solely the responsibility of individual governments and the clue is in the name: European Union.  Yet for the last three years, this country has pushed the burden of the collapsed banks onto the backs of a tiny and financially exhausted population.
In doing this, we have adopted a language that fails to reflect the reality of what is happening.  We speak of bailouts, rescues and of protecting the banking system.   As recently as today, an Irish Times article about the Euro crisis refers to the recapitalisation of Anglo-Irish bank.

Christine Lagarde

Stop, I want to tell them.  Listen to what you’re saying.

Anglo was not recapitalised, and neither was Irish Nationwide.  Both of these companies are dead.  They are no longer banks.  They can’t be recapitalised.  What happened was that a huge amount of money was appropriated from Irish citizens and given to speculators who had taken a risk on these pyramid schemes masquerading as banks and who were in danger of losing their bets.  A significant amount remains to be paid to the same people.

Can we get that absolutely plain?  As far as Anglo and Nationwide are concerned, there is no bailout, no rescue and no recapitalisation.  It’s a straight transfer of cash out of your pocket and into someone else’s wallet.

Of the Troika members, the IMF has consistently taken the view that Ireland should not have to carry the burden alone, and that investors should be forced to share the loss.  Even though my view is that the shareholders should have been told to get stuffed, at least the IMF’s view is more rational that that of the ECB and the European Commission.  Even the Financial Times has been arguing that the bondholders should be given a debt-for-equity swap, which translates roughly into Congratulations. You now own a bust bank.

Two banks, which are currently the subject of a major police investigation, collapsed with huge debts as a result of bad management decisions.  They were private companies, with private investors, they served as conduits for property developers’ money and they had no role in the broader economy.  Neither bank had so much as a single ATM on a single street corner in the entire country.  Despite what we were told, if they had been allowed to collapse, nothing at all would have happened, and yet our government decided that you and I should make sure none of the investors lost a penny.

This is the great mystery of the insane bank guarantee scheme devised by Brian Lenihan in 2008.  This man was not a fool, so why on earth did he decide to sacrifice the future of generations in order to ensure that investors in a private company would not suffer?  The answer to this question will explain why Ireland is now so crushed beneath debts.  I believe that it lies in a combination of pressure from the ECB and a fear that some very dirty things would be exposed.

What might those dirty secrets be?  Well, perhaps they might include the amount of debt the two Ponzi banks owned involving senior politicians, judges, police, senior civil servants and all the other members of the elites in this little state.  Or to put it another way, it might expose the amount of favours that had been bought, and if that happened, who knows what sort of contagion might have been triggered?  Before you know it, one dirty secret might expose the next until the whole thing lay bare.  Much easier to sell generations of Irish children into poverty and emigration.

Ridiculous as Lenihan’s call to patriotic action was, at least it came from a man of privilege and member of the corrupt ruling party.  What would you expect from him?  But to hear Lenihan’s puffed-up Fianna Fáil nonsense repeated by Eamon Gilmore was nothing short of nauseating.  The Labour Party leader urged the opposition to pull on the green jersey and support the government in its talks with the Troika.  I remember when Eamon Gilmore had principles, but this statement was worthy of Bertie Ahern at his most venal.

Of course, there were those who insisted from the start that we should not take on these obligations, that it was foolish, and there were even some who said that the decision to do so was treason, including the same Eamon Gilmore who now calls on us to pull on the green jersey.  Gilmore made this charge against Brian Cowen little more than a year ago under parliamentary privilege, accusing him of knowing that Anglo was bankrupt when he issued the guarantee.

Not so long ago, we heard Pat Rabbitte, another Labour minister who once had principles, defending the disgraceful give-away of our gas and oil to multinational companies for nothing, so what exactly are we to make of our political leaders?  I don’t know.  Personally, I think we have no hope of mature political leadership in this country.  It seems to be a choice between Fine Gael, who are really Fianna Fáil, Labour who are quickly becoming Fianna Fáil, or the Shinners, who will eventually become Fianna Fáil.  Maybe we don’t deserve anything but gobshites in government.

Things are coming to a head, now that Christine Lagarde, the IMF head, has spoken so bluntly of the dangers facing the world economy.

Anglo and Irish Nationwide, the two dead banks, are now amalgamated into an entity called the Irish Banking Resolution Corporation (IBRC), or the First Bad Bank of Ireland, depending on your point of view.  This is the entity that gets all the banking money we borrow from the EU and the IMF, and while it’s true that Ireland’s costs involve more than simply pumping money into this bad bank, it’s a very large component of our costs.  We borrow €3.1 billion every year to pump into this financial black hole which in turn pays out a pile of money to creditors.

Now here’s the conundrum.  The famous promissory notes that everyone talks about attract an interest rate of 8.6%.  This is the IOU that the Irish government provided to Anglo.   And Anglo, in turn, was able to go to the only outside bank that would lend it a penny — the ECB, from which it got money at something like 2%.  Unfortunately, the idea of reducing the interest rate won’t save us anything, because we already own Anglo.  Whatever margin it makes on the money will come back to the exchequer in time.

The real disaster is that the cash is gone.   It’s been handed over to the investors who couldn’t believe their luck that some idiot was going to cover the losses they’d already written off.  If we had declined to take these losses onto ourselves, nothing at all would have happened.   In this respect, Anglo and Nationwide were no different from a company making engines or matchsticks.  Private companies go bust all the time.  Ireland’s credit rating would not have been reduced, since the liabilities were those of two private corporations and there was absolutely no reason why any government should take them over.

But as we know now, that’s not what happened, for reasons that have yet to be exposed.  My own view is that the lunacy of the banking guarantee was caused by a mixture of hubris, stupidity and corruption, although I don’t think these three things were necessarily all present at the same time, or in the same people.

Now that the IMF has come out so blatantly and pointed at Europe as the problem, perhaps it will be possible to re-examine the Irish bailout deal with the Troika, although in truth, it’s very hard to see where the scope for renegotiation exists, now that all our money has been stolen with the connivance of successive Irish governments.

 

 

  16 Responses to “IMF Warns of Global Economic Collapse Due To Euro Crisis”

Comments (16)
  1.  

    Bock , please save my sanity . Anglo Irish is to receive 1.25 billion euro today . The Irish prime minister Mr Kenny when asked for the names of the bond holders replyed ” I don’t have the names ” So are we to believe that a country that is being milked dry does not know who they are giving the money to ?. I find this interesting .

  2.  

    So who are these people called “Bond holders ” ? . Maybe you hit a sensitive nerve when the possibility that some of the bondholders are home grown and have prominent positions in the state apparatus . No wonder the prime minister did not “have the names ” Think the unthinkable , you have just done that .

  3.  

    Charles O’Rourke » Charles, you could do us a great service by telling everyone you know in your home country about Statoil’s theft of our gas. Will you do that?

  4.  

    I already do that Bock , they don’t believe me .

  5.  

    Try again. The evidence is there.

  6.  

    I have met people in the Norwegian oil industry , good people not greedy people . They become silent when I raise the Irish oil and gas finds and the notorious bad deal the Irish government struck . Would some of the bondholders be the same as those who gave away the gas and oil ? , just a reflection .

  7.  

    Bock I have often thought the same thing – ie that our guys would look after 80% of the foreign investors just in order to save the 20% who were the cronies here. Yes the names would be interesting. Given our previous history of making the oridanary uninvolved citizen pay for the banks fuck – ups (the AIB / ICI deal for example), the current arrangements are to be expected once our masters get their fingers burned. Just as an aside , a little girl appeared on the Late Late last Friday, there was tears in my eyes. She appeared with her parents in order to raise funds for DEBRA. Our govt. does not properly fund these causes, but can come up with billions to protect the people who matter can’t it? It really is about time we stopped calling this country a republic n’est pas?

  8.  

    Your good oil people don’t want to know about their part in this theft. It would force them to think.

  9.  

    Norway being an enlightened society lacks the mental frame work to envisage the monumental criminality involved in giving away a countrys natural resources to the detriment of its people . Since Norway would never do that the believe no other country would do it . Hence they don’t believe me , despite the evidence .

  10.  

    In that case, somebody needs to wake them up. Since I don’t speak Norwegian, you have the job.

  11.  

    Job accepted, How about a ” Quisling of the Year “award to those scoundrels in Ireland who have pillaged the land ? .

  12.  

    You remember when Gilmore & Rabitte had principles Bock? are you sure – its easy to appear to have principles as an opportunist opposition politician, without actually having them. Those guys never believed a word of what they were saying, did you hear about Gilmore & Wikileaks:
    http://www.independent.ie/national-news/wikileaks/gilmore-took-opposing-views-in-public-and-in-private-2662663.html

  13.  

    This question has been exercising me for a while, Are we ruled by Knaves or Fools? I agree with you Bock, when we elected these fuckers we thought we might get a few months of honesty out of them, actually I really only expected only a few weeks but the writing was on the wall from the very minute that Enda Kenny brazenly denied his promises to the Roscommon Hospital. When he was caught out in his lies his response basically was “Fuck ye, we’re in power now, we’ll do what we like”. Ever since then we have been treated to a plethora of these gombeens renege on and reverse one election promise after another from the famous “not another penny” from Leo Varadkar to the “Bailing out insolvent Banks is economic treason” of Eamon Gilmore. What these people have managed to do is to look after themselves and their friends and to make sure that the rest of us pay. They have shamelessly gone about this in a way which is frankly breathtaking. Enda for example employs eight advisors at a cost of nearly 1,000,000 eu p/a to the state. His constituency office, with a staff of eleven is completely covered by the state at a cost of nearly 600,000 eu p/a. And then we hear these fuckers preach austerity for the rest of us and lately terrify pensioners and then have the absolute gall to tell us to pull on the green jersey. They have shown us that they are nothing but a bunch of inept spineless county councillors, the real power lies in Germany, and like all county councillors everywhere, are out to milk the system for all they can get for themselves and their friends. I think i am correct in saying that Fine Gael’s Pat Kennedy is still a member of the party, despite having been caught fiddling his expenses. The Labour party are equally as bad and I for one will never vote for them again. Can you just imagine if Labour were in opposition now. Can’t you just hear that whinging sanctimonious bitch, Joan Burton whining on the Vincent Brown show about the right of the Irish people to have a referendum, the very right that they are trying to deny us now. The whole lot of them would make you puke. What amazes me is why we did not see this coming. After all we have haqd a Fine Gael, Labour Corporation in this town for the last good few years and they have absolutely wrecked the town, As to my question at the start, Knaves or Fools? Well they are certainly not fools when it comes to looking out for themselves.

  14.  

    Of course we saw this coming. Irish political parties are indistinguishable from each other, and have been for decades.

  15.  

    It’s official, it;s all our fault. Inda has chenaged his mind and told the elite in Davros that the Irish people indulged in “mad borrowing”. No mention of mad lending.

    Contrast to December 4 when he exonerated us and told al la Good Will Hunting “It’s not your fault”

    By blaming the people he is exonerating the institutions of the state and the craven bankers for their irresponsible lending and mis-management of the economy.

    Indas lips moved but was it his voice?

  16.  

    Enda’s most recent speech has to be looked at in context and the context of Enda’s speech is very interesting. The when and the where of Enda’s speech is very important, the when was when Ireland had just paid out a huge amount of money to unsecured bondholders and the where was to a group of international bankers at the World Economic Forum in Switzerland, home of secret banks. Enda was explaining the cause of Ireland’s economic woes to a group of international bankers. Enda explained how people had behaved in a reckless and folhardy manner, basically gambling. Given where he was making the speech it seems safe to assume that Enda was talking about Irish people and not Lithuanians. The subtext of this speech, which was clearly understood by all of Enda’s audience, is that greedy Irish people gambled recklessly and brought the country to the brink of ruin and are now having to pay the price for their recklessness. We can expect to hear a lot more of this claptrap in the near future as an excuse for more and more savage cuts. What Enda did not mention was that very large, very greedy, French and German Banks also gambled recklessly with the Irish economy and also brought this country to the brink of ruin and are possibly even more responsible for our economic state than even the greedy Irish people given that they were the ones giving out the money. However these banks are not being held in any way responsible for this and neither it seems are the “greedy” Irish people, it is the ordinary Irish person, who was not a developer and did not incur huge debts, apart maybe from having to buy a house at greatly inflated prices to make fortunes for developers and banks, both Irish and foreign. After proudly announcing last week that Ireland would not be looking for any kind of debt forgiveness, all I can say is that it is very nice for Enda to be able to afford such noble and lofty sentiments. Having insulated himself and his family and friends, and numerous advisors and helpers from any fears of economic discomfort, he felt a warm glow receiving the applause of the foreign bankers, most of whom probably could not believe their luck listening to this cartoon.

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