The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[mayogodhelpus@gmail.com]

Well done to Obama, more or less telling the UK they are a nobody if they aren't in the European Union. Lets hope China, India and Brazil tell them the same in the next few weeks.

[muppet]

Obama made the following statement in a speech in september 2007:

http://www.nytimes.com/2007/09/17/us/politics/16text-obama.html?pagewanted=print&_r=0

(No one can make sound financial judgement) "if the information is flawed, if there is fraud or if the risks facing financial institutions are not fully disclosed."

This might appear to state the obvious but it is a pity Brian Lenihan and the rest of the Dáil didn't listen 12 months later.

[Declan]

Gene Kerrigan: Our plea for sanity falling on deaf ears

Sunday January 20 2013

His voice carried in its very timbre the burden of great responsibility. His words raised immeasurable hope within his listeners. Abraham Lincoln spoke of a whole continent alive with possibilities. "We must work hard and together," he said, "to renovate, to restore and to renew our Union . . . It is in that spirit of doing, that spirit of renewing, that Ireland . . ."

Oops, sorry. My desktop's a mess and I've mixed up my Abraham and my Enda speeches. Easy to do. Our Glorious Leader was in fine form last week, as he lauded "the spirit of doing". He stood in front of the European Parliament and emoted in all directions about how "our Atlantic island" has "long been at the heart of Europe". Mr Kenny spoke of how "in the sixth and seventh centuries our monks, Columbanus and Killian among their number, left in their small boats to bring the light of learning to the European mind".

No harm reminding those French savages that it was the Irish who raised them from the muck and taught them the difference between Merlot and Sauvignon. And we're not done yet with civilising them. "Today Ireland keeps that faith with our continent, with our Union of peoples . . ."

And so on, and on, and on. No one remembers who held the presidency of the EU last year or the year before – but when it's Ireland's turn to call meetings to order, and to serve the tea and biscuits, our politicians cream themselves with pride. Filling a routine administrative function, they emote as though they've won an Oscar, an Olympic Gold, or seven Tours de France in a row.

Enda Lincoln was even inspired by that uplifting Irish Times TV advert, in which an intrepid reporter walks through a wall, and crawls under floorboards in search of "why". We must, said Enda, "be ready to argue the very 'Why?' of Europe".

He spoke – I kid you not – of how the Irish economy is growing, exports are booming, the money markets are rushing to lend us cash. Apparently, things are going tremendously well in this great little nation. So well, in fact, that in his spare time Enda hopes to play a part in ending "global poverty and hunger". And in "bringing peace to troubled regions such as Syria, Iran, Mali and Somalia".

It's not that there aren't some problems here at home. "Our proud people continue to labour under the weight of bank-related debt." Ah, says I to myself. Here it comes. He's going to start kicking shins. Abraham Kenny is about to demand that his people be set free from the appalling bank debt slavery that has been forced upon them.

"Austerity has brought pain and suffering to many families, many homes," he said. And immediately, in case the EU politicians thought he was complaining, he added: "But the Irish people have borne that weight, that pain, with remarkable courage and patience and quiet dignity."

Not to mention dread and despair and fearful passivity.

While Enda was telling the EU parliament about the submissiveness of "our proud people", back home some economists were totting up a few figures. Trade union researcher Michael Taft was sifting through data from Eurostat, the EU's official repository of statistics. What's the effect of the banking collapse on general government budgets?

Taft produced, on his blog, Notes On The Front, a table to show that those generous Germans have contributed no less than €40bn to saving the banks. A whole 1.5 per cent of their GDP. God bless you, Frau Merkel.

And Ireland? Well, Germany is a whale of an economy – we're just a shrimp. Yet Taft's figures show we've been saddled with private bank debts of €41bn – a whopping 25 per cent of GDP. (This isn't counting other costs, such as the asset-stripping of the National Pension Reserve Fund).

Figures for other countries are tiny (the UK, for instance, is next in line, at €11bn. Ireland, Taft shows, is paying for 42 per cent of the European private bank bailout. But, of course, we're doing so with "remarkable courage and patience and quiet dignity".

Can't be right, says I to myself. This Taft lad is a whizz with figures and I'm not, but that sounds – well, outrageous. So, against my better nature, I pored through the Eurostat Supplementary Table for the Financial Crisis.

Page 8: "Overall, the most significant increase in deficit due to government interventions in financial institutions is noted for Ireland." The Supplementary Table uses percentage points (pp) to measure effect on GDP.

For "Germany, Latvia, the Netherlands, Austria, Portugal, Slovenia and the United Kingdom, the deficit increased . . . from around 0.5 pp to 3 pp over the reference period" of 2007-11. "Spain and Lithuania also reported a negative impact, but for smaller amounts."

So, the maximum cost to EU countries was 3 percentage points of GDP, or less. And Ireland, with its "proud people" and their "remarkable courage and patience and quiet dignity"? The Supplementary Table shows that bailing out our bankers and bondholders has cost us 26 percentage points of GDP.

Meanwhile, economist Constantin Gurdgiev has been crunching some CSO numbers on per capita income, and posting the results on his blog, True Economics. In 2011, "Irish per capita national disposable income . . . was down 20.2 per cent on peak levels and was below 1998-1999 average". Disposable incomes at 1999 levels. And expected to remain so.

He adds: "Ireland's real economy has already lost not a decade but over 14 years worth of growth." Projections for income growth suggest the so-called lost decade will in Ireland's case run "between 16 and 20 years".

Now, for us, with our remarkable courage, patience and quiet dignity, austerity means many injuries and indignities. The old, the sick, the young – they've all had their pockets picked. Let's take one such scandal – cochlear implants.

Medical science is truly wonderful – kids who would previously have grown up deaf can now have cochlear implants that restore their hearing. A human achievement truly to be proud of.

Unfortunately, the HSE is short of money – much as they'd like, they can only give the toddlers one cochlear implant each. Now, with only one ear functioning, ambient noise prevents the kids hearing properly – they can't work out the direction sound is coming from. Little kids need to hear properly in order to learn how to speak.

This is truly rotten. And the parents and the doctors and the HSE all want the best for the kids – but, hey, if we're going to meet those troika targets and keep our position as the biggest bank-bailer-outers in Europe, y'know, something's got to give.

Those kids suffered a random natural injury that limits their lives – and medical science fought back, and gives them an equal chance with the rest of us – and, well, the State can't do everything. It can't bail out bankers and bondholders and kids with hearing problems. The buck's got to stop with someone – sorry, kids.

Anyway, in their silent world, those children will, I'm sure, make Enda proud – with their remarkable courage, patience and quiet dignity.

And our main national discussion is still about abortion - Jaysus it's enough to make you go back on the drink before the end of January

[seafoid]

Mickey Harte wades in on abortion


http://www.irishtimes.com/newspaper/ireland/2013/0121/1224329103032.html

"There was, he said "no issue more important than the protection of human life. There's no point in saving the economy if a child's right to life is compromised or forgotten".


What if saving the economy resulted in 600 adult suicides less per year ?   

[trileacman]

Mickey Harte wades in on abortion


http://www.irishtimes.com/newspaper/ireland/2013/0121/1224329103032.html

"There was, he said "no issue more important than the protection of human life. There's no point in saving the economy if a child's right to life is compromised or forgotten".


What if saving the economy resulted in 600 adult suicides less per year ?

And that's a quote from who?

[seafoid]

Mickey Harte wades in on abortion


http://www.irishtimes.com/newspaper/ireland/2013/0121/1224329103032.html

"There was, he said "no issue more important than the protection of human life. There's no point in saving the economy if a child's right to life is compromised or forgotten".


What if saving the economy resulted in 600 adult suicides less per year ?

And that's a quote from who?

from myself . I think that notion is grossly insensitive to the families of everyone lost to suicide as a result of the financial crisis . And Irish economic history . Presumably the famine was preferable to a few terminations as well . Mickey is à great bunch of lads  but that line is nuts.

[mouview]

Gene Kerrigan: Our plea for sanity falling on deaf ears

Sunday January 20 2013

etc.

Blah blah blah. Typical Sindo, week in , week out, giving out about the government in place, telling them what to do, being wise after the event. Never a mention of their own multifarious shortcomings, never giving credit where it's due. A complete rag at this stage.

[seafoid]

Gene Kerrigan: Our plea for sanity falling on deaf ears

Sunday January 20 2013

etc.

Blah blah blah. Typical Sindo, week in , week out, giving out about the government in place, telling them what to do, being wise after the event. Never a mention of their own multifarious shortcomings, never giving credit where it's due. A complete rag at this stage.

their coverage of the derek quinlan / paddy mckillen court case was the ultimate in brown nosing

[Declan]

Typical Sindo, week in , week out, giving out about the government in place, telling them what to do, being wise after the event.

If you read Kerrigan over the years you'd know that he's the complete opposite to the Sindo's usual editorial line.
Being wise after the event - nonsense. He's been consistent in his views for as long as I've seen his columns

[muppet]

http://www.golemxiv.co.uk/2013/01/currency-wars-their-imperial-aspect/

Currency Wars – their Imperial aspect

by Golem XIV on JANUARY 21, 2013 in LATEST
A quick thought about the money printing and currency wars.

When the current and on-going bank debt crisis began in 2007 we were told that the answer was to print up money (call it QE or 'borrowing' if it makes you happy) and give it to the banks. This would, we were assured, relieve the purely short-term cash and collateral shortage the banks appeared to be suffering, and once it did that the banks would be able to return to lending to the the real economy and we would all be saved. They printed. They gave it to the banks and...nothing happened.Except that it all got worse.

The banks got the money. But they did not lend to the real economy. Much of the cash they received, they parked straight back in the central banks where they were paid interest on it – by us.  Some was used as cash flow to pay bills. The rest, a growing amount, was used for speculation. Either by lending it to speculators or by the banks making it available to their own internal Prop. trading desk where they could speculate with it themselves.

Which was lovely if you were a banker but it did also mean that when the bankers needed more money and more had to be printed, there was a problem with justifying it. At first the bankers and our rulers tried to brazen it out and claimed we just hadn't printed enough the first time, or the second, and a bit of belt tightening and a dose of 'we're all in it together' cap touching and forelock tugging, as we handed our betters some more cash, would do the trick this time. Only it didn't.

Then something new entered the story. Instead of being forced into talking about the failure of what they had done, our leaders began to point to other countries who had been printing and claimed that while we were printing in order to help our banks lend and help the rest of us, 'they', those johnny-foreigners, were printing in order to devalue their currency against ours. And although no one actually said so, there was the handy, albeit unspoken implication that perhaps the reason our printing hadn't worked was because some countries, mentioning no names – oh all right then, China and Japan! –  were undermining all our otherwise brilliant efforts with their dastardly and selfish currency manipulation!

We were printing to help our banks help us. They were currency manipulators.

We seemed to slide from a world of central banks taking 'coordinated and heroic emergency actions' to a world where the same printing, when done by foreigners, was now reported as a 'race to the  bottom' of 'beggar they neighbor' devaluations.

Tempers have frayed. G20 meeting have become even more farcical and resemble ever more uncannily the gatherings of powdered, wig-wearing elites, so far removed from the people they rule over that they simply can not imagine why the commoners don't just work harder, earn less and consume more like the plan says. Let them eat cake has become let them borrow. Why won't the ungrateful wretches understand that there are no free hand-outs – at least not for them. Money can only be handed to those who know how to use it profitably, not waste it on pointless things like health services and pensions. The common people must realize they have brought this upon themselves and must now accept their medicine and work longer for less so they can get back to shopping, consuming and above all borrowing.

But I digress.

It seems to me this familiar story is missing something. Nations are printing and despite the fears of hyper-inflation none has so far appeared. Why not? I am sure there are many factors but I would like to offer one I have been thinking about.  Inflation occurs when the supply of money grows out of proportion to the economic activity it serves. When there is too much money around for too few goods and services, then prices inflate.

Fine. But how do we calculate the volume of goods and services the money is servicing, in order to know when re-flating will become inflating. The standard way is to compare the money supply with GDP. But money, in our debt backed world is tied up in credit and the larger and thoroughly international, border-less world of credit backed 'money'. That money does not stop at borders or fit within the statistics compiled within those borders. Most of the  'broad money' is simply not captured by national GDP figures but still exists, in the shadown, off-shore world.

We print and from that printing comes a torrent of new credit and debt which takes our currency and ties it to economic activity beyond our borders and beyond our economy. I have begun to think our nations are printing with another goal in mind. The more nations print the more their currency oozes out into the global economy, The more deals denominated in your currency the more good and services it is tied to. Those things may not be in 'your' economy, but they are still things your currency services and as such they form the demand for your currency which in turn, is what gives it its 'value'.

Nations that print do run the risk of inflation IF the volume of that currency becomes too great for the economic activity it services or to put it in another way, the amount of economic activity the currency has access to.

I wonder if nations, who by this point have painted themselves in to an exit-less corner of having to print to endlessly prop up their banks and achieve short term devaluations of  their currency, have realized that if you can't spur growth in your home economy then a workable alternative (and a far faster one) is to insinuate your currency in to other people's economic growth.

If so then the situation evolves again. Nations that have been printing can see that if they can expand the use of their currency –  by making it cheaper to borrow, selling more debt so more people hold IOUs in your currency, getting your currency in to other people's hands so more people use it to fund their economic activity, –  then your printing and your currency is tied to ever more economic activity, much more than you have at home, and is, by this means, safeguarded from inflation. I wonder if we could consider the Yen Carry -Trade, part of the reason Japan could print all through the  lost decades without inflation? The Japanese economy didn't have to grow as long as trade utlitizing the Yen did.

Are we entering a world where printing begins to create its own imperative to print more.  The more you print, the more your currency invades other people's economic activities, the safer your printing is and the more license you have to print yet more.

This, it seems to me, ushers in another side to currency wars. This side is not simply about currency manipulation and devaluation but about Currency Imperialism. Print up cash the way you used to train up soldiers and send those paper and electronic warriors off to conquer foreign lands. The only problem is the one common to all forms of Imperial empire building. Not everyone can expand indefinitely. At some point empires rub against each other and compete for space and influence. If I am even partly correct then wars will be fought over whose currency is used for what, by whom and where. I would suggest two wars, at least, have already been fought, at least in part, over this when the Euro and dollar clashed over what currency oil should be sold in. And I think this might prove to be a useful way of deciphering why new wars will be fought.

I have written about Currency Wars before offering specific analyses looking at China, Iran, India and Japan among others.

[LeoMc]

http://www.golemxiv.co.uk/2013/01/currency-wars-their-imperial-aspect/

Currency Wars – their Imperial aspect

by Golem XIV on JANUARY 21, 2013 in LATEST
A quick thought about the money printing and currency wars.

When the current and on-going bank debt crisis began in 2007 we were told that the answer was to print up money (call it QE or 'borrowing' if it makes you happy) and give it to the banks. This would, we were assured, relieve the purely short-term cash and collateral shortage the banks appeared to be suffering, and once it did that the banks would be able to return to lending to the the real economy and we would all be saved. They printed. They gave it to the banks and...nothing happened.Except that it all got worse.

The banks got the money. But they did not lend to the real economy. Much of the cash they received, they parked straight back in the central banks where they were paid interest on it – by us.  Some was used as cash flow to pay bills. The rest, a growing amount, was used for speculation. Either by lending it to speculators or by the banks making it available to their own internal Prop. trading desk where they could speculate with it themselves.

Which was lovely if you were a banker but it did also mean that when the bankers needed more money and more had to be printed, there was a problem with justifying it. At first the bankers and our rulers tried to brazen it out and claimed we just hadn't printed enough the first time, or the second, and a bit of belt tightening and a dose of 'we're all in it together' cap touching and forelock tugging, as we handed our betters some more cash, would do the trick this time. Only it didn't.

Then something new entered the story. Instead of being forced into talking about the failure of what they had done, our leaders began to point to other countries who had been printing and claimed that while we were printing in order to help our banks lend and help the rest of us, 'they', those johnny-foreigners, were printing in order to devalue their currency against ours. And although no one actually said so, there was the handy, albeit unspoken implication that perhaps the reason our printing hadn't worked was because some countries, mentioning no names – oh all right then, China and Japan! –  were undermining all our otherwise brilliant efforts with their dastardly and selfish currency manipulation!

We were printing to help our banks help us. They were currency manipulators.

We seemed to slide from a world of central banks taking 'coordinated and heroic emergency actions' to a world where the same printing, when done by foreigners, was now reported as a 'race to the  bottom' of 'beggar they neighbor' devaluations.

Tempers have frayed. G20 meeting have become even more farcical and resemble ever more uncannily the gatherings of powdered, wig-wearing elites, so far removed from the people they rule over that they simply can not imagine why the commoners don't just work harder, earn less and consume more like the plan says. Let them eat cake has become let them borrow. Why won't the ungrateful wretches understand that there are no free hand-outs – at least not for them. Money can only be handed to those who know how to use it profitably, not waste it on pointless things like health services and pensions. The common people must realize they have brought this upon themselves and must now accept their medicine and work longer for less so they can get back to shopping, consuming and above all borrowing.

But I digress.

It seems to me this familiar story is missing something. Nations are printing and despite the fears of hyper-inflation none has so far appeared. Why not? I am sure there are many factors but I would like to offer one I have been thinking about.  Inflation occurs when the supply of money grows out of proportion to the economic activity it serves. When there is too much money around for too few goods and services, then prices inflate.

Fine. But how do we calculate the volume of goods and services the money is servicing, in order to know when re-flating will become inflating. The standard way is to compare the money supply with GDP. But money, in our debt backed world is tied up in credit and the larger and thoroughly international, border-less world of credit backed 'money'. That money does not stop at borders or fit within the statistics compiled within those borders. Most of the  'broad money' is simply not captured by national GDP figures but still exists, in the shadown, off-shore world.

We print and from that printing comes a torrent of new credit and debt which takes our currency and ties it to economic activity beyond our borders and beyond our economy. I have begun to think our nations are printing with another goal in mind. The more nations print the more their currency oozes out into the global economy, The more deals denominated in your currency the more good and services it is tied to. Those things may not be in 'your' economy, but they are still things your currency services and as such they form the demand for your currency which in turn, is what gives it its 'value'.

Nations that print do run the risk of inflation IF the volume of that currency becomes too great for the economic activity it services or to put it in another way, the amount of economic activity the currency has access to.

I wonder if nations, who by this point have painted themselves in to an exit-less corner of having to print to endlessly prop up their banks and achieve short term devaluations of  their currency, have realized that if you can't spur growth in your home economy then a workable alternative (and a far faster one) is to insinuate your currency in to other people's economic growth.

If so then the situation evolves again. Nations that have been printing can see that if they can expand the use of their currency –  by making it cheaper to borrow, selling more debt so more people hold IOUs in your currency, getting your currency in to other people's hands so more people use it to fund their economic activity, –  then your printing and your currency is tied to ever more economic activity, much more than you have at home, and is, by this means, safeguarded from inflation. I wonder if we could consider the Yen Carry -Trade, part of the reason Japan could print all through the  lost decades without inflation? The Japanese economy didn't have to grow as long as trade utlitizing the Yen did.

Are we entering a world where printing begins to create its own imperative to print more.  The more you print, the more your currency invades other people's economic activities, the safer your printing is and the more license you have to print yet more.

This, it seems to me, ushers in another side to currency wars. This side is not simply about currency manipulation and devaluation but about Currency Imperialism. Print up cash the way you used to train up soldiers and send those paper and electronic warriors off to conquer foreign lands. The only problem is the one common to all forms of Imperial empire building. Not everyone can expand indefinitely. At some point empires rub against each other and compete for space and influence. If I am even partly correct then wars will be fought over whose currency is used for what, by whom and where. I would suggest two wars, at least, have already been fought, at least in part, over this when the Euro and dollar clashed over what currency oil should be sold in. And I think this might prove to be a useful way of deciphering why new wars will be fought.

I have written about Currency Wars before offering specific analyses looking at China, Iran, India and Japan among others.

This gets touched upon in an old Jack Reacher book, Killing floor.
It talks a lot about the US Dollar being the accepted currency in many parts of the world and reckoned there were twice as many dollars floating round outside the US than inside it.
While the US currency is seen as stable people are happy to use it in place of their own less stable currency. While people are happy to trade with the dollar it never actually gets "cashed in" and is in effect a giant interest free loan that may never need to be paid back.

[muppet]

http://www.ft.com/intl/cms/s/0/4258b6da-693b-11e2-b254-00144feab49a.html#axzz2JCl1qDcO

The EFTA (European Free Trade Association) court on Monday dismissed all claims against Iceland, ruling that it had not breached the deposit guarantee directive because Iceland's financial crisis was so big. It also held that Iceland had not discriminated between depositors in its own country and those in the UK or Netherlands.

[Main Street]

http://www.ft.com/intl/cms/s/0/4258b6da-693b-11e2-b254-00144feab49a.html#axzz2JCl1qDcO

The EFTA (European Free Trade Association) court on Monday dismissed all claims against Iceland, ruling that it had not breached the deposit guarantee directive because Iceland's financial crisis was so big. It also held that Iceland had not discriminated between depositors in its own country and those in the UK or Netherlands.

The Iceland state had already accepted to pay back the minimum (up to Eur20k) for each Icesave deposit held by a johnny foreigner in the online accounts in the UK and Netherlands and uses the proceeds from the sale of failed bank's considerable assets in England to do so. Most of that has been repaid to those two government already.
But the UK and the Netherlands were not satisfied with that. They wanted the Iceland state found guilty of not being able to meet those deposit guarantees immediately the bank failed in Oct 2008, also they wanted the Iceland state be found guilty of discriminating against the foreign deposit holders when the Iceland parliament passed a law at the 11th hour in Oct 2008, closing down the failed banks with their bad debts left inside, and moving only the Icelandic deposit accounts over to the newly created banks.  And lastly the UK and Netherlands were suing for damages, for an amount equal to 50% of Iceland's GDP.


This is a huge judgement by the EFTA court in Iceland's favour, stunning actually  because this is not a neutral court per se. EFTA court judgements usually tow the line of the EFTA status quo and the ESA (EFTA Surveillance Authority) who took the case against Iceland, almost never lose a case there.
http://dealbook.nytimes.com/2013/01/28/iceland-wins-major-case-over-failed-bank/

[muppet]

http://www.foreignpolicy.com/articles/2013/01/28/why_cant_europe_save_itself_eurozone_currency_union?page=0,0

[seafoid]

This is one of my favourite stories from the Financial crisis

http://www.ft.com/cms/s/0/02761746-9606-11e1-a6a0-00144feab49a.html#ixzz2JJPemauq

"The stocks that are currently high dividend have been bid up a lot because people want income. That could continue, but it feels like you're a bit late to the party."

By preferring high-dividend paying stocks, investors are once again flying in the face of financial theory. Franco Modigliani and Merton Miller won the 1985 Nobel memorial prize in economics for pointing out that in an efficient market dividend payouts are irrelevant.