If you wonder why our EU partners want our taxpayers to pay off the loans of a failed private bank, just look who it owed money to – some of the biggest names in Europe. If we don’t prop them up, how many will have to be bailed out by their governments? (Cut-out-and-keep guide to Anglo bondholders by politico.ie)
Listening to Michael Noonan yesterday worried me for a number of reasons. Firstly, because he’s Minister for Finance. That never strikes me as an ideal arrangement. Worse though, he sounded worried and downcast. This on the day when, at long last, it looks like we’re going to get some deal on the bank debt burden. That’s supposed to be about the best news you could possibly hope for.
If you’re a Noonan, that is. In a world where there is no choice but to force the taxpayer to reward the speculator, the best it seems we can hope for is to get the immediate liability for those bond repayments converted into a long term loan from the European Stability Mechanism (ESM), so taking away the looming danger of default. This will improve our credit rating, meaning we’ll be able to borrow the money to repay the bank debts all by ourselves. Whoopee!
Yeah. No wonder he sounds depressed.
The even less joysome part is that there is clearly going to be no write-down. Arguably in fact, the new mechanism will mean that we’ll be closing off any future possibility of burning the bondholders because now the debt will be to the ESM rather than the reckless lenders themselves. So less of a deal, more a sort of… trap.
If you’re wondering what the Irish debt crisis – and indeed the Euro crisis as a whole – is all about, you could do worse than read this opinion piece, a passionate but clear denunciation of how we are being exploited from independent TDStephen Donnelly. I wouldn’t have put as much emphasis on the public pay deal, but that aside he puts it so well that it’s hardly worth my while writing about it.
I’ll quote him extensively instead… (Emphasis mine)
The bonds¹ were bought from Anglo and INBS in 2007, at the height of the property bubble. They offered higher profits than buying Government bonds, as they didn’t come with a Government guarantee. If the people buying these bonds did their homework, they would have noticed that Anglo and INBS were massively exposed to the Irish property market. They will have read the IMF‘s warning of the “possibility of an abrupt unwinding of the housing boom”. They would have known that the higher potential profits offered by Anglo and INBS came with the clear possibility of losses. Indeed, some of the bonds will have been sold on by the original purchasers at a loss. When this happened, the European financial system did not collapse, the ATMs did not stop working. This week their gamble pays off. Yet again the Ferrari showrooms in London, New York and Tokyo will toast the Irish.
Looking back, perhaps there were signs
In a massive irony, the ATMs did stop working this week – though at Ulster Bank, the largest operator here the government didn’t have to buy. It turned out to be due to a software update cock-up and not a bank run, but you know what? People dealt with it. Screaming crowds didn’t surge down the streets, horses didn’t start eating each other. Yet that was the scenario the banks used to frighten ministers into nationalising the liabilities of their profit-drunk industry. They bluffed us.
Donnelly continues:
This comes at an enormous human cost. Recently, the HSE told the parents of disabled young adults in Wicklow that there was no longer any money to fund rehabilitative training for their children. […] But we’ll find the €1.1bn [to pay these investors], and we’ll pay the €40m every year in interest. As of last Monday, there were 19 young adults in this situation in the Dublin/Mid-Leinster region. The €40m would pay for their training for the next 150 years.
The Government has reduced welfare payments to single parents, cut support to the disabled, removed staff from Deis² schools and introduced regressive charges. At the same time it incurs enormous interest payments to cover the losses of private sector investors who knew they were betting on a risky venture.
And who knew, what is more, that their reckless lending was fuelling a destructive property bubble. In 2007, they were clearly out to grab a quick profit off a boom. To use a term from the housing market that you don’t hear so much anymore, they were out to “flip” our economy.
They flipped it all right. Those flippers flipped it good.
And this week we reward them for it, with a further €1.1 billion. Money that decent non-gambling taxpayers will work for years if not generations to repay, while the vulnerable in our country have their lives stolen. Whose exactly is the moral hazard here?
Bonds which our government is paying this week, even though they were owed by private financial institutions that went bankrupt.
Abie Philbin Bowman made a good point at the gig yesterday. Once, people believed in a mysterious, invisible force. They didn’t understand it, they could hardly even describe it, but they credited it with vast power, claimed it controlled just about every aspect of the world, and declared that whatever it wanted to happen was what must happen. They called it “God”.
Now, they call it “the economy”.
It’s so true. Nobody really understands the economy. We can’t even define it – is it the sum total of human transactions, or just the sum total of human transactions that involve things you can count? But nevertheless we positively invite it to take control of our lives. As someone else said, the problem with calling economics the “dismal science” is not that people think it’s dismal, but that people think it’s science. At best, it might aspire to being a branch of psychology. Yet people actually try to run the world according to its self-defeating prophecies.
A concept tossed around a lot in current economics is “competitiveness”, which sounds like it has to be a simple, positive good. Got to be lean and fit to make it in this world, don’tcha? It seems almost synonymous with efficiency. But when you look at it more closely you realise that there are a lot of assumptions involved here. “Competitive” is sometimes used as a synonym for “cheap”. When it comes to wage costs, it seems competitive always means cheap.
Competitiveness is at heart a sports metaphor, so let us imagine economic activity as a game like soccer or rugby. We – as a country – have to get out there and be competitive. Cool. Let’s go get ’em! We’ll show them who… costs less. We’ll give it 110% all the way through the first half, and right through the second, and on through the third, and… Hold on, three halves? When does this game end actually?
It doesn’t. We’ve taken the concept of competitiveness from sport, but overlooked the fact that a game is a brief interlude of peak performance. You can’t live your whole life like that. That would be, well, a desperate struggle. If democracy and civilisation exist for any reason at all, surely it is to free us from desperate struggle. And yet struggle is precisely what they’re telling us we need.
So it turns out that, like a lot of words used in economics, “competitiveness” translates most accurately as “whatever makes most money for the people who already have most money”.
In or near Galway? Doing anything on Sunday afternoon? Like free entertainment? Enjoy comedy?
Good. Those are all nice things.
Wait, yeah. There’s a free comedy gig in Kelly’s Bar in Bridge Street at 3:00pm Sunday. Comics Abie Philbin Bowman and Aidan Killian are touring the country in protest against the bank bailout. You’ve got to do something.
Stand Up Against the Bankers is a show fuelled not by profit but goodwill; no accommodation has been booked in advance and tour dates are determined in large part by the willingness of a community to host the pair. The audience is invited to attend free of charge and get into the meitheal spirit by supporting however they can. Some will cook them dinner after the show, someone else will put them up in their spare room. Some will throw a few quid into the hat and some will help to publicise the next leg of the tour. Aidan Killian explains:
Touring like this creates a different kind of relationship with the audience. We’re not asking them to buy a ticket in advance. And we better make sure our jokes are damn funny. Otherwise, we’ll end up sleeping in the car, eating nettle soup.
Aidan Killian, a former banker with the once prestigious (now disgraced) Bear Stearns, saw the writing on the wall in 2007 and decided to do something he believed in. He left the job, still carrying a huge mortgage for a house in Florida he has never seen. With his understanding of how banks had cheated the system, Aidan turned the tables and forced the bank to accept their liability for the property. This story forms a key part of his comedy set.
Abie Philbin Bowman took the 2006 Edinburgh Fringe by storm with his debut, “Jesus: The Guantanamo Years”. His one-man comedies have since toured from London’s West End to Hollywood LA to Lahore Pakistan (during a State of Emergency). His jokes have been taken seriously by everyone from the Ku Klux Klan to Al Qaeda.
Abie spent the Celtic Tiger era pursuing his comedy dreams. He couldn’t afford to buy or rent a house, so remained living at home with his parents. He recalls the day the financial crisis broke.
It was awful: people were in negative equity, losing their jobs, facing repossession… At some point, I realised: ‘Hang on. I don’t own a house. So I’m not in negative equity and nobody can outsource my job to China.’ Somehow, I had gone to bed, a textbook loser… and woken up, an economic genius.
The two stand-ups travelled to last year’s Edinburgh Fringe Festival with solo shows on Ireland’s financial crisis and won rave reviews. They wanted to tour Ireland, but realised the country was broke. Explains Abie:
The financial crisis makes us all feel powerless. Every time we spend money, we’re paying tax, which is used to bail out the banks and pay off the Troika. But the Troika can’t tax barter, or generosity, or laughter.
Admission is free as they say, but please give them some money anyway. Otherwise they may eat all my food.
The Galway dates in full:
Campbells Tavern, Cloughanover, Headford on Friday June 22nd at 8:30pm
The Hop Inn, Athenry on Saturday June 23rd at 8:30pm
Kelly’s Bar, Bridge St, Galway on Sunday June 24th at 3pm.
The Ballyhea group was on telly today – TV3’s Morning Show. That’s as close to media glamour as I’ve got in a while. Not that I was on myself – I’d be useless at that kind of thing, cameras tickle. They had the eloquent, informed ones: Diarmuid and Cath and Vicky. Between them they covered the enormous cost of the bank bailout to each and every one of us (€60,000 for the average household if you spread it evenly), how it affects ordinary people, and how the current response to it will be as disastrous for us as similar ‘medicine’ was for the Developing World – a pretty comprehensive encapsulation of the issue. You can watch it here.
Back to our adventures in Germany then. I’ll skip over the details of organising tickets for the bus into town, the tram to the hotel, and the rooms – except to say that Cath did them all, and found the cheapest way to do them all. One of those people every expedition needs.
Settled in, we next needed to reconnoitre. Having dinner seemed like a good way to do that, so we headed in to the older and more attractive part of Frankfurt. It has to be said, it’s not very big. For a major global hub of wealth and power, Frankfurt is surprisingly unimpressive. It has its expensive suburbs of course, but the historical city centre is not much to look at. And while I’m being rude about our hosts, German sounds like English with a wheel missing.
You feel bad about thinking this when you remember that the reason there’s so little left of historical Frankfurt is that it was obliterated in World War II, first by bombing and then by ground combat. Before then, it actually had the largest mediaeval city centre in the world. So we had our dinner in the ruins, essentially. But first we took the photo-opportunity of a statue representing justice to make our point.
After checking out the ECB building and finding it a lot less like Forty Knox than our mental image, we had dinner at the outdoor restaurant you see behind us there – mainly sausages and sauerkraut of course. I am pleased and relieved to be able to report that the frankfurters were the nicest. After, we fell to singing songs – mainly Cork ones like the Banks and Thady Quill. We weren’t drunk or anything, it just seemed appropriate. Eventually though a woman resident brusquely told us we were too loud, the implication being that this was far too classy a neighbourhood for that sort of thing.
To show solidarity with us, a drunk German man at the next table started off a chorus of Molly Malone. Politics was on!
Only now can the story be told – because since I got back I’ve been too shagged. How did I become involved with the Ballyhea Burn The Bank Bondholders band? I have to be honest, I am not altogether sure. It sounded like a wild thing to do. It was a noble cause. It would mean spending time with one of my favouritest people. I had some time, flights were cheap, what the hell.
Our journey begins as it ends – in Knock. Knock is one of the world’s weirdest little airports. It has a runway long enough for 747s, but it is miles and miles away from anywhere almost anyone would want to go. The nearest cities are Galway, Limerick and Derry, but the closest of them is an hour away and they all have their own airports anyway.
Knock was the brainchild not of a planner or politician, but of a priest – who thought that the site of a minor and, it has to be said, suspect apparition could become a major destination for pilgrims, if there were only an airport to bring them. But the maxim “If you build it they will come” applies poorly to superfluous infrastructure. Knock had to wait for a new miracle and a new prophet – Michael O’Leary of Ryanair, who knew how to put unwanted airports to good use. So from Knock, an hour away from Galway, we can fly to Hahn, two hours away from Frankfurt. It’s a very useful service – and not only for us, as we were to find.
Knock though is well worth visiting for itself, if you enjoy mocking people’s beliefs. Perhaps I can find a better way to put that… It’s fascinating, because it displays religion at its most incredible. The town of Knock is more or less a religious strip mall, selling objects of veneration in boxes of a dozen beside charming isn’t-drunkenness-funny souvenirs. It’s hard to imagine how anyone’s faith could survive a pilgrimage here.
I would swear that religious art has just got more dumb-looking in recent decades. These figures seem actually to have concussion, the features weirdly cartoonish and toy-like. The 3D pictures of animals are… unexplained. Virgin Marys now come in Standard and Luminous. I resisted the desire to buy a luminous one.
I do not know what a Happy Death Cross is, or how it differs from the usual sad death type of crucifix. We speculate that if you look close, Jesus has a big smile.
So we tear ourselves away from the anthropology just in time to meet up with the Ballyhea folks at the airport, and board our flight. Though not before paying an extra €10, for Knock is a toll airport.
Aboard then, and of course the first thing that greets you is Ryanair’s extraordinary panoply of warnings, right in front of your face. They know that the usual safety cards are often damaged or taken as souvenirs (seriously, I have a friend who collects them), so to save a few cents every flight Ryanair plaster them to the back of the seat in front of you. You spend your entire journey being constantly reminded of the things that can go wrong with a plane.
And I ask you, if you didn’t know all the safety drills already, would you really be able to work them out from this? What the hell is that guy doing with the yellow vest – the hula? And look at the first panel of “Exit B Overwings”, the bottom row of the right side. The whole point of doing this in pictures is so you don’t need to read English to understand the drill. But without that caption, the picture seems to say “If you look out the window and see fire, stay in the plane”. That’s really only good advice if you’re flying through a fire.
Gotta say, plane wings are lovely things.
When we boarded though, someone noticed a thing that took us all by surprise. Among our fellow-passengers was one of the people we were hoping to meet in Frankfurt – Doctor Patrick Honohan, the governor of Ireland’s Central Bank, on his way to the very meeting we were going to picket. This, I admit, was troubling. Were we so broke that our Central Bank Governor had to fly Ryanair? It seems almost shameful. Of course to his credit, Honahan had recently turned down a pay rise in the hope, naive as it might seem, of business and public sector leaders following suit. So perhaps this was another example of economy.
Sorry for the lack of updates in the last couple of days. Frankfurt was exhausting – but fun, and very satisfying. For once I was actually doing something about the state of the nation instead of just talking about it.
The story, in case you haven’t heard yet: Ballyhea is a townland in Cork once known for little except a decent GAA tradition; now it’s perhaps the most spoken-of place in the country. Because on Tuesday night, the Ballyhea Bank Bondholder Bailout Protest group – and some hangers-on like me – attached a petition of complaint to the front door of the European Central Bank, after the model of Martin Luther and before a meeting of the Eurozone’s Central Bank governors.
So was it an exercise in futility, to petition one of the most aloof and rarefied institutions on the planet? Of course it wasn’t going to change ECB policy. But it brought it to the attention of the wider world that Ireland is not obediently accepting the austerity process – even if that’s the image our government wants to project – and that we are not ready to bear the gambling losses of commercial banks.
We don’t like it, we don’t deserve it – the problem is we don’t think we can do anything about it. And that sense of helplessness becomes a self-fulfilling prophecy. Something like this is a way to break that cycle, and make people aware that they can stand up. I’m a fine example; it’s not like me to take direct action. I fret about it compromising my neutrality as a commentator, I want to avoid being identified with one particular issue, I… am a lazy, cynical bastard basically. But Ballyhea’s uncomplicated approach was an inspiration. We booked Ryanair flights to Frankfurt – €56 return including the bus from the Ryanairport – and stood in the street with some signs. For this, we got to talk with the Wall Street Journal, German newspaper Bild and several other international media outlets, plus appear on Irish TV (video) and radio. We got the message out there.
We’re here in Frankfurt to protest the fact that a truly vast amount of private bank debt had been foisted on the Irish public. We are asked to put up with this in order to keep the Euro from collapsing, but one has to ask if that is just, or feasible, or even worth it.
This says it all really. One of the stars on the euro sign outside the ECB, the actual big one you see on the TV news, held together with sticky plaster.
George Soros knows money. A student of the great philosopher Karl Popper, he has become one of the most vocal critics of modern economics and capitalism. But he doesn’t just talk about the failings of the financial markets. He uses his insight to make a quite seriously incredible amount of cash from them. Out of this, he gives billions to worthy causes. A guy with an opinion worth hearing then.
The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly. […] It took some time for the financial markets to discover that government bonds which had been considered riskless are subject to speculative attack and may actually default; but when they did, risk premiums rose dramatically. This rendered commercial banks whose balance sheets were loaded with those bonds potentially insolvent. And that constituted the two main components of the problem confronting us today: a sovereign debt crisis and a banking crisis which are closely interlinked.
In other words, people lent cheaply to Eurozone banks and governments because they believed that there was zero risk of a Eurozone country being allowed to default. But after Lehman, Merkel – unilaterally – declared that Eurozone countries would have to support their own banks. Markets eventually realised this implied that Eurozone countries might have to default, and so lending costs to them shot up – just when we needed to borrow in order to support our banks! It was a single, immensely short-sighted decision of Merkel’s administration that precipitated our current situation.
And their continuing failure to respond adequately is turning a crisis into a disaster for the EU:
Just as in the 1980’s [Third World debt crisis] all the blame and burden is falling on the “periphery” and the responsibility of the “center” has never been properly acknowledged. Yet in the euro crisis the responsibility of the center is even greater than it was in 1982. The “center” is responsible for designing a flawed system, enacting flawed treaties, pursuing flawed policies and always doing too little too late. In the 1980’s Latin America suffered a lost decade; a similar fate now awaits Europe.
He does more than just lay blame of course. The power to save the situation, he argues, is also in the hands of the creditor nations. But it won’t be easy:
The German public cannot understand why a policy of structural reforms and fiscal austerity that worked for Germany a decade ago will not work Europe today. Germany then could enjoy an export led recovery but the eurozone today is caught in a deflationary debt trap. The German public does not see any deflation at home; on the contrary, wages are rising and there are vacancies for skilled jobs which are eagerly snapped up by immigrants from other European countries. Reluctance to invest abroad and the influx of flight capital are fueling a real estate boom. Exports may be slowing but employment is still rising. In these circumstances it would require an extraordinary effort by the German government to convince the German public to embrace the extraordinary measures that would be necessary to reverse the current trend. And they have only a three months’ window in which to do it.
We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be. The future of Europe depends on it.
Three months, to get the EU back on the track of being a positive, voluntary association of nations. If we can’t do that, then the choice we’re faced with is basically between effective German control of an impoverished continent, or the sudden and messy disintegration of the Euro. So… We’d better find a solution to this thing. Stat.
Well I hope not of course. I hope I was wrong, and the greater cuts we’re now committed to don’t further hurt the poor and stall the economy. But… It’s hard to see how they won’t.
Too late I know, but it’s worth listening to Paul Krugman‘s argument that austerity is being cheered on by people with an agenda. Said agenda being, to free the rich from the burden of the poor. Some of you will have seen him nail the point on Jeremy Paxman’s BBC show last Wednesday. Though clearly, not enough of you.
Somehow, the mayhem wreaked by unfettered capitalism in the last decade or so gets turned into an excuse to destroy the welfare state. What is the logical justification for that? Because they can, apparently.
All right, enough of the sad. Today started dull but became amazingly hot. I found myself without suitable attire, so I bought some shorts in TK Maxx. I usually try to just buy from charity shops, but there were none nearby and this seemed the next best thing.
I love the label. Whoever wrote this is bored with their job and spends the day trying to sneak in fruit and veg references. Look:
“Dries faster due to the higher proportion of polyester yams.”
“Is fabric washed and peached for extra softness and comfort.”
