The Great Irish Robbery

Details are just out on the Irish "bailout", and they're pretty painful if you happen to work for a living in the Emerald Isle. From where I'm sitting, it looks like the "troika" (EU, ECB & IMF) have literally robbed the Irish National Pension Reserve Fund, which acts as a backstop to all Irish pension funds. It has a value of €24 billion. Of this, eight billion is already "invested" in Irish banks. Of the €16 billion left, the troika has determined that €12.5 billion is to go directly into Irish banks, with the troika providing another €22.5 billion for the banks. Another €50 billion will be lent to the Irish Gov't, which is to provide the banks with sufficient funds to avoid going belly up. All told, the troika has agreed to loan Ireland and her banks €67.5 billion (only after emptying the pension fund) at an interest rate of 5.8%, a rate that is higher than was given to the Greeks six months ago. Given that Ireland is about to enter into a Depression and that the Irish Gov't is being held responsible for the solvency of these banks, this actually isn't nearly enough, especially as Ireland's economy (and thus tax revenues) begin declining.

In the last year or so, the ECB has provided Irish banks €130 billion in loans to keep them afloat. The troika has informed Ireland that this support will be ending as well.

Oh yes.. and the troika demanded Ireland's government enact a new "austerity" budget. Amongst the things included in this budget were slashing the minimum wage, 24,000 job cuts, raises in taxes amongst all income groups and slashes in services provided to the poorest amongst the Irish.

What of the (mainly German and English) bondholders of these banks.. do they get to feel the pain ? Of course not.. 100% guarantees across the board. Restructuring is still not negotiable.

All of this.. why ? To support Irish banks which foolishly lent out waaayy too much to waaayy too many, especially in the area of real estate. But more accurately, it's to protect the German, English and other banks which are very heavily invested in Irish banks. Were the Irish government to simply walk away (ala Iceland) it might cause a catastrophe for some very large banks on the Olde Continent.

If I were in Dublin, I myself would down a few pints of stout and join the protesters. One day soon enough, the people of a nation will have enough of this robbery on behalf of the banksters and put an end to this. They in fact maybe already awakening. On last Thursday, there was an election in Donegal, an Irish county where the Fiana Fail Party of PM Cowen has always won. The result ? Fiana Fail was flailed by a two to one margin by the Sinn Fein Party.. yes the very same party that is arm in arm with the IRA. The day after the election a couple of Sinn Fein MP's met with the IMF delegation.. and told the delegation they were neither needed or wanted in Ireland. The AK47 round across the bow I dare say. Then on saturday, an estimated 75,000 Irish marched against the bailout.. whilst small for America, this in fact amounts to roughly 2% of the population. Here in the States, that would be the equivalent of having six million people march to the White House. Another Irish Rebellion at hand ? If so, it's d@mn sure for the right reasons. This article in the Irish Times says it all: http://www.irishtimes.com/newspaper/opinion/2010/1129/1224284370155.html?via=rel

Update: Having just read an article from Paul Krugman, who gets absolutely everything dead wrong, I find myself in agreement with his post re: Ireland. The End is Nigh !! http://www.nytimes.com/2010/11/26/opinion/26krugman.html?_r=2

Irish misery and viva Correa !

Well today the Irish situation was "resolved".. an IMF/EU bailout, with the UK and Sweden also kicking in some funds. Champagne bottles are popping with the good news. Equities and commodities are rising; Eurocrats everywhere are giving themselves high fives. Now was'nt that easy ?

Indeed.. except for the people expected to pay for this. The government of Ireland, like Greece, Iceland, Ukraine & Latvia before it, has agreed to give an ever larger portion of their budget to prop up rotten banks.. at the expense of social services and government employee wage slashes. In Latvia & Iceland, this has led to a deflationary depression where their economies shrink by at least 25% and possibly more. Greece is heading in this same direction. Worse, when their economies shrink, these governments will be forced into yet more slashes of services and wages as their revenues don't keep up with projections. It's like taking more and more plasma from a man who's losing weight.

In one respect, Ireland did actually win.. the Eurocrats were hell bent to make Ireland raise it's corporate tax from it's (EU low) rate of 12.5%, thus keeping Ireland competetive and able to attract more businesses to it's shores. This remained intact. Indeed Ireland has a host of new pharmaceutical industries about to ramp up and looks to be a good candidate to keep it's boat afloat. But it was a small victory. In the end Ireland parted with part of their hard won sovereignty and condemned their people to a decade of indentured servitide in order to bail out banks.

At some point, the people of these nations will have enough of this and will either elect or install somebody who will essentially flip off the bankers. Has this ever happened recently ? Why yes it did. Tiny Ecuador elected a Belgian educated economist and leftist Rafael Correa, in late 2006. His announced priorities were to increase social spending at the cost of debt repayments. In 2007, Correa immediately began threatening to default on Ecuador's debt. He declared these debts illegitimate due to them being induced by corrupt regimes, threatened to sue them in international courts and other actions. His intent was to get them to accept restructuring, and it worked.. Ecuadoran debts were substancially reduced. I'm still looking for the exact figures, but my understanding was that debt was reduced to something like 1/10th of face value.This was an important point. In the 1980s, Alan Garcia of Peru simply stopped paying.. and for a while it worked. But after a couple of years, Peru had to come back to the markets hat in hand, long after Garcia was gone.. with those debts intact. Correa's successors will not have debt hanging over them irregardless of whatever else he accomplishes.

At the end of the day, what Correa did has to happen elsewhere, be it by forcing them as Correa did, or by simply halting payments as did Peru. I'm aghast at what I've just written.. I sound like a revolutionary.. and in America I would be considered a "righty". But sadly mathematics don't lie.. these nations are entirely unable to pay. It's only a matter of when and how for a long list of nations, mainly in Europe.

If I were King...

C'mon everyone.. we've all thought about it.. just admit it. Tomorrow morning, at 8am sharp, Obama and the entire US Congress, along with Ben Bernanke, arrive at you royal chamber and upon bent knee acknowledge you as their sovereign, ready to serve. But.. what would you do ? Here's your chance to write three Amendments to the US Constitution. Here's mine:

Currency Amendment: The nation's currency shall henceforth be the responsibility of the Currency Board. Every four years each state shall elect one member of the board by an election of the people. The Currency Board shall determine the amount of growth in the nation's GDP each quarter from a variety of sources. They will then monetize 1/10 of this amount, to be divided equally among all adult citizens and sent in the form of a check to said citizens. A vote of 4/5ths of the people shall be required to overturn any provision of this amendment.

Leveraged Transaction Ban: Henceforth, all transactions involving banks, stocks, bonds or any other financial instruments shall not use leverage. All financial transactions shall be fully funded. A vote of 4/5ths of the people shall be required to overturn any provision of this amendment in every instance.

Government Debt Ban: Henceforth, all levels of government.. state, federal & local.. will be banned from incurring debt, be it actual or implied. A vote of 4/5ths of the people shall be required to overturn any provision of this amendment in every instance.

C'mon folks.. give it a try.. I'm curious to see what others have in mind to do as King..