Smoking Tape

AngloSo the “Anglo Tapes” – internal phone recordings made during the last days of Anglo Irish Bank. Do they constitute a smoking gun?

Hoo boy, you betcha. A smoking gun, covered with bloody fingerprints, with a note taped to the barrel saying “For doing the murder with”.

This is the stuff.

I have to admit I was a little dismissive when I first heard of this, much as I couldn’t quite believe all the fuss over the PRISM revelations. (“You mean you believed US intelligence forces didn’t spy on whoever the hell they liked?”) We all knew that Anglo had ripped off the nation. Had, as the Indo bluntly put it, “cost Ireland our sovereignty“. But we also knew it was done with nods and winks and complicity, screened off by tendrils of loyalty and friendship. These people don’t leave evidence.

But that really seems to be what we’ve got here. The tapes record senior – very senior – management explaining a strategy of lying about the severity of the bank’s situation. They knew that if they revealed the full picture, government would see little alternative except to let the bank fold. They cynically calculated that if the State was tricked into giving a few billion of support at first, it would be forced to follow up with more and more in a frantic effort to save its investment. Which is precisely what happened.

They cheated the State in order to try to save their wealth and positions, cheated it of billions and billions. And when I say the State of course, I mean you and I. People who pay tax, people who rely on the State to support and protect them. Everyone in the country, in other words. We were all robbed by this, quite deliberately.

We shouldn’t oversimplify. This doesn’t let the other lenders and speculators off the hook for stoking the property boom, exonerate the politicians in Fianna Fáil (and elements of the media) who were complicit in the bubble, or mean that the euro was not grossly mismanaged. Anglo’s rooking of the public was certainly not the only cause of Ireland’s economic demise. But these men tricked the country into taking on billions and billions in debt. Billions that could have gone to creating jobs or equipping hospitals.

And there are tape recordings of them saying how they did it.

One does not want to prejudice any possible legal proceedings, so to be circumspect… Wait, what was that? Sorry, I thought I heard something. Probably thunder. Though it sounded even more like a long corridor of cell doors clanging shut.

Cognitive Dissidence

365px-International_Monetary_Fund_logo.svgIreland is the success story of austerity, the figures prove it. According to the IMF, the domestic economy grew 2.38% over 2010-2012. The bitter medicine is working. Soon we’ll be able to borrow on the markets again.

Yay.

But even the IMF admits it got it wrong in Greece. Severe austerity there has only deepened recession and dashed any hope of quick recovery. Yet somehow the very same policy seems to have worked in Ireland. Mysterious.

Hold on. Is this not the same Ireland that was recently called a tax haven in the US Congress? A country that – there is no secret to this – encourages transnational corporations to declare their profits here instead of in

other, higher-taxing jurisdictions. How much of our apparent growth, touted by our EU partners as the fruit of prudent austerity, is actually owed to what we might call the Tourism For Your Taxes sector?

Every damn bit of it.

Discounting the money-shuffling activities of transnationals, the domestic economy in Ireland declined by 5.2% between 2010 and 2012 (Source: Dr. Constantin Gurdgiev). The real economy – the one in which people who actually live here have to work and buy things and pay their (much higher) taxes – is one of closing businesses, joblessness, emigration, debt. Austerity as it actually works.

This presents an interesting conundrum for our EU partners. They wish both to use us as proof that austerity works, and to condemn taxation practices that are patently ripping them off, all the while maintaining the cognitive dissonance necessary to avoid acknowledging a causal connection.

Good luck with that, partners.

You Owe The Bank Nothing

House prices in Ireland as a multiple of average income. (Source: Morgan Kelly, Finfacts)
House prices in Ireland as a multiple of average income. (Source: Morgan Kelly, Finfacts.ie)

Somebody on the radio saying they’re going abroad to declare bankruptcy. A different holiday idea I suppose. Naturally others soon phoned in to object to this “moral hazard“, as the banks would like us to call it. It was wrong they said to walk away from your mortgaged home just because you owed more on it than it was worth.

That got me thinking about what debt actually means. Is there a moral obligation to repay?

Well of course there is. It’s a matter of trust, which is what morality is basically all about. If you’re in a business, you were given materials and help by your workers and suppliers. You are obliged to pay them so they in turn can pay their helpers and suppliers and so on. The wheels of the economy keep turning and everyone gets fed. A financial debt is a promise like any other.

However there is one important qualification. You are only indebted when and if you actually receive something.

The banks will argue of course that they gave you money when you signed that mortgage so you are obviously obliged to repay it, along with the agreed interest. But the thing is, did they actually give you money?

No. They never gave it to you, because they never had it to give to you.

I don’t mean they didn’t have it in their vaults; we all know that’s not how finance works. All loans are borrowed, when it comes down to it, from the future. They’re based on the reasonable prediction that most of the time they will be paid back in full and with interest. But when the banks decided instead to start making ludicrous loans for several times the value of the houses they were raised against, thereby further escalating the price of housing and so allowing them to offer even bigger loans, they knew that ultimately the whole thing had to blow up. The loans were fake. There was no money in the future to borrow from.

When the inevitable crash came the banks of course had a parachute: They were too big to fail – or so at least they managed to convince themselves. And with themselves convinced they had little trouble convincing the political parties they were going out with – who effectively promised that they would make this impossible future money somehow magically become real money.

Or to be precise, they promised that we would.

The money you seemed to get from the bank ultimately came therefore out of your own pocket. You were tricked into lending it to yourself so that they could take a cut. It’s immoral to stop repaying that? It’s probably immoral to keep going.

ESRI public debt
The surprising result of neo-liberal economic policy – massive public debt.

Besides, you will only be a little ahead of the crowd. It should come as no surprise that even with all of us working together we can’t actually afford to turn the banks’ lies into reality. The State itself is going to default at some point. That is as inevitable now as the property crash was. Our public debt is soon going to be 200% of GDP, and the harder we try to pay it the less we will be able to; we are being crushed in fact by the burden of trying. Actual people being crushed, by imagined money.

The sooner we all default the better.

The Criminalisation Of Dissent

NoProtest1

College year being over I can think again about other aspects of reality. Such as the mess it’s in. I made it to a meeting about economics and change, and we were discussing why in Ireland we seem to be just letting this shit happen to us. The conclusion was that it is not just inexplicable passivity on the public’s part, all sorts of pressures are placed on people to make them keep their heads down. Some of them subtle, some brutal.

Somebody used the memorable phrase “The criminalisation of dissent”, and I had to draw this.

Stop, Press: For some protesty goodness, why not try these two short plays at the Town Hall Theatre? They’ll be followed by (optional) discussions with real historians and economists about the parlous state of the parlous State.

Local Poverty Tax

TaxForm
What is this? Pretty sure this wasn’t on the form before. Is this something I need to know about? Who are “High Income Individuals” – and why do they get their own special forms? What the hell is “Restriction Of Reliefs”? It sounds like something you pay for in a PVC-themed night club.

It’s that time of year again. The time when I do my taxes. Yeah, I know it’s not the time you do your taxes, but it is the time I do mine. About six months late, on average.

Once again, we open the form all a-tremble, excited to see just how many wholly indecipherable questions – perhaps entire pages – they’ve added this time. It’s not so long since they re-formed the form for the self employed so that non-accountants could read it. Year on year since though, entropy has dripped back in. A clause here, a category there, and now about 90% of it doesn’t even seem to apply to me. I guess some people’s businesses must be very different from mine, making very different things.

Money, to name one.

At least the online version has asterisks to mark the required fields. I figure I can’t go too wrong if I just fill all those. Then I scan for places to put in expenses and allowances I can apply for. Did you know by the way that if you are getting any form of social welfare payment you are entitled to a PAYE tax credit on top of your normal tax free allowance? I have no idea why, I can only guess it’s because tax is deducted at source from welfare payments – in some sort of entirely notional way. Anyway, ours is not to reason why, ours is to remember to tick the box. It may come in useful if they disallow some of my larger expenses again.

Antique erotic netsuke are research materials, dammit.

While getting my tax affairs in order, I remembered that I’d received an email from the new Local Property Tax agency. We didn’t use to have any residence-based taxes in Ireland, a Fianna Fáil government abolished them one time in a spree of vote-buying. Now that another FF administration has driven the economy off a cliff we have to have them back – though of course it’s the parties now in power that get the blame for it. Political lesson: If you create the most mess, nobody asks you to clean up.

Anyway I hadn’t paid much attention to the email. It’s a tax for property owners and I don’t own any property, I just rent a small apartment in an old four-storey building in the middle of town. Reading it now though, I find that seemingly I do. According to “our records”, as the tax people put it – by which I think they mean a hat – I own the building. Not just the room I live in. The whole. Fucking. Building. Walls of solid stone four feet thick, older than the United States, a good restaurant downstairs. According to an official government agency, it is all mine.

I tell you one thing, I’m not paying any more rent.

Coup In Ireland

Noonan

It was strangely reminiscent of that military coup where the signal to attack was, of all things, the Portuguese entry in the Eurovision Song Contest. With coded announcements, the President snatched away from a diplomatic mission, an emergency all-night sitting of the house, and plenty apparently deliberate misinformation, “Project Red” saw Ireland taken over – though not by the military.

If you went by the news coverage, you might be forgiven (a special offer, today only) for thinking that we just escaped the jaws of disaster here. On the contrary – Ireland avoided an acute short-term problem by making an awful long-term commitment. A very, very, very long-term commitment. We were forced into it at what might be termed fiscal gunpoint.

On September 30th 2008 in the wake of the collapse of Lehman brothers in the US, the Irish government pledged to guarantee the banking industry here. Not just the banks’ deposits but all their liabilities – including the vast amounts they’d borrowed from banks overseas to fuel the country’s property speculation bubble. That figure turned out to be truly mind-boggling – over €400 billion. That is more, even after inflation, then all of Germany was forced to pay in reparations after World War I.

You might fairly ask how the government of a small country could hope to come up with €400 billion. They couldn’t of course. It was a bluff, a confident front designed to ward off market chaos and speculation. But if you’re bluffing, you don’t bet the house. The government exposed the country to a liability that beggared belief. Indeed, beggared the lot of us.

It’s been argued in their defence that the industry lied to them, directly, about the scale of their liabilities. That’s true, but they knew damn well that there was something seriously wrong anyway. These banks had been making staggering profits for a decade mainly by lending people money on excessively easy terms, thereby boosting the price of housing, thereby creating demand for bigger loans… Banks had been enjoying a prolonged bonanza, but it was a bonanza of debt raised against assets that no one could seriously argue were not grossly overpriced.

Why had banks not simply raised the price of borrowing, to profit more from less lending – and at the same time moderate demand? Because there was no limit to the amount of money they had to offer. Other banks, in the US, the UK, but mainly in continental Europe, were lending them as much as they could shift. There was a global credit boom going on of course, there was an (originally) quite genuine boom in the Irish economy, and to cap all this there was no longer a national currency to wildly inflate and so damp things down as had happened in booms gone by. Ireland represents perhaps 1% of the Eurozone economy, so even incandescent levels of overheating here were not going to drive up the cost of money. Money was, as odd as this may sound, too cheap. Yet keeping inflation down was the main – indeed about the only – guiding principle of the European Central bank. It, or rather its political masters, chose to pursue a policy which might have been reasonable for the Eurozone as a whole, but which was utterly unsustainable for Ireland.

Some people, mainly politicians eager to share out their responsibility, have blamed the population for borrowing too much, as if economic meltdown is caused by sudden outbreaks of cupidity. Those who borrowed more than they should have did so in the main because banks were quite literally pushing money on them. Like many, I opened my post one morning to find I’d been approved for a loan I hadn’t asked for. Certainly far too many got into property, but the housing boom was not only driven by speculation. Another major factor was that thanks to all this cheap credit, house prices were rising far faster than incomes. People worried – not unreasonably – that if they didn’t buy a house soon they would never be able to afford one. Lenders fuelled the fear with the marketing image of the “property ladder”, the idea that if you wanted any chance of owning a good home in the future you needed to buy a bad one now. Many, many awful houses and apartments were sold – and even more built. The entire Irish banking industry had in effect become a Ponzi scheme, profitable only as long as there was new investment. When the market fell it fell like a lift with the cables cut. In doing so, it called the government’s bluff.

At which point they could and should have said “You got us. Of course we can’t possibly afford to pay that much money. Ever. It’s an insane figure.” And they would have been right of course, we can’t. Even after realising the assets of the collapsed banks and throwing in the national reserves, we’re still left something like 70 billion short. They even had an excellent excuse to renege on the guarantee when it came to light just how much these banks had been lying to them about their assets. They should have known better, sure, but officially they didn’t.

Unfortunately however government needed to pay more than just the billions in bank debt. This Ponzi scheme had essentially become the tax base. Not only was a lot of revenue raised on property sales, a simply ludicrous proportion of the population was by then employed in building buildings that no one would ever actually want but which existed solely to be traded on the bubble market. Without this income the exchequer couldn’t even keep public services going, pay doctors and teachers and police and pensions. But the fact that our economy looked to be (and indeed, was) on the point of collapse meant that the country couldn’t borrow cash on the market at anything approaching an affordable rate. The only institutions with both the money and the motivation to lend to us affordably were those of the Eurozone, the very ones who were to a large degree responsible for the collapse. In return, they held us to the untenable: The undertaking to pay back all the money our failed banks had borrowed to fuel the property bubble. The fear being that if we didn’t, the banks that lent to our failed banks would in turn fail, and so on.

So the Irish government’s gamble didn’t save our banking industry; virtually ever lending institution in the country (honourable exception: the Credit Union movement) went bust. But it probably stopped the European banking system going down like the world’s most expensive set of dominoes.

This is what really rankles. Instead of being punished by the market for poor – indeed, reckless and harmful – investment decisions, these institutions are going to be rewarded just as if they had made profitable decisions. They’ll probably give themselves bonuses. And these rewards will be paid not willingly by the market but unwillingly by the taxpayers of Ireland whose jobs and lives they so damaged. And the taxpayers’ children. And their children, if there’s anyone left here by then. Those of us who had the willpower to resist the easy credit have to reward them, just as if we’d taken it. Those who lost their homes because they could not afford the repayments to these institutions, still have to reward these institutions. Those who now own homes worth a fraction of what they owe on them but who are nevertheless still making repayments to these institutions, will see their taxes go to these institutions. The injustice of it is barely conceivable. Ireland is paying roughly 42% of the cost of Europe’s banking crisis. We can’t possibly do it of course. That’s why the Eurozone governments and ECB cut the deal that all the fuss has been about. To help us.

To help us pay back the money we didn’t borrow.

You may have seen the headline figure, that this is meant to save us €20 billion. Are they writing off some of the debt? No. On no account are we to even contemplate not paying any of that money. The twenty billion is just the difference between the “easy” interest we’ll get from them and a rate we might have paid otherwise. They’re giving us easy terms to repay the debt we don’t owe. Some deal.

This explains why we had to shut down the Irish Bank Resolution Corporation – formerly Anglo – literally overnight. While most of the bad debts of the various failed Irish institutions were still being held by this “zombie bank”, there lingered some remote possibility that a government would have the guts to say “Look, the state has no moral duty to pay back failed private investments. Goodnight.” We almost certainly would have negotiated a deal rather than just pulled the plug of course, but we had that bargaining chip. Instead we’ve cashed in our last chance for freedom. Whereas repudiating Anglo’s debts would not have been technically or morally a loan default – indeed, might have been seen favourably by the markets as the shedding of a liability – there is no way out of our commitment to the ECB. Short, that is, of crashing out of the Euro in flames.

So now we are committed to this vast payment. That still doesn’t mean we can pay it of course; indeed, attempting to will just drive us deeper into recession. We will inevitably default on this, as Germany defaulted on the onerous Versailles treaty terms. It will just be later rather than sooner. The only achievement will be a few more years – perhaps decades – spent impoverishing ourselves to enrich those irresponsible lenders.

The “deal” won yesterday was quite the opposite – a scared and desperate government buying time and in doing so, condemning their country to indefinite economic servitude. Death of the Republic would hardly be an exaggeration. Democracy is effectively suspended; the government we elected to overturn the errors of the last has repeated and even amplified them. We are being dictated to – not by the military, not by a despot, but by an industry.

Mend The Constitution

Pregnancy in the 26th week.

Over four thousand women from Ireland are known to have obtained an abortion in England or Wales last year, a figure that probably under-represents the true numbers significantly. Why are they having abortions abroad and not here?

If you could sum it up in a single word, that word would be “hypocrisy”.

We have a hypocritical Constitutional ban that has the effect not of preventing abortion, but of making it someone else’s problem. It allows us to pretend it hardly happens at all, that we live by higher ideals. In fact, we live a lie.

And oddly, to an extent it is not even our own hypocrisy. The amendment was the result of a manipulative campaign coming largely from overseas, particularly the British organisation SPUC, that intended to make Ireland a showcase for Conservative Christian values. They wanted to prove it was possible, despite the examples of the US, UK and most of Western Europe, for abortion to be banned in a country where women had a vote.

Yes, a clear majority disapproved of abortion. They don’t necessarily approve of enforced birth either though. Irish people are no strangers to moral complexity and contradiction, and even if doctrinal absolutes came easy in those post-Papal-visit days they would not have stayed that way for long. But the amendment to the constitution stifled that moral debate by rendering it pointless.

It still stifles it. Even now we are hung up – insanely – on whether a danger of suicide constitutes a legitimate threat to the life of a pregnant woman. Of course suicidal feelings are a real threat to life, but some want to pretend the danger away in case it is used as a pretext to give abortions to those who merely want them.

This is all mad. Why are we trying to force women to give birth when, for whatever reason, they do not want to give birth? Only remorseless ideology produces such inhumane law.

Ah but the unborn are people, you can’t kill them!

Except they are not. That is just a religious doctrine, a philosophical view, forced into our Constitution to make hypocrites of all of us. Who is to say at what point human life begins? We could leave the decision to priests, to doctors or scientists. But I think instead we should leave it up to the woman who has to bring that life into the world.

Who else’s decision should it be?