Posts Tagged ‘politics’

Disclaimer: I am not an economist, finance expert or politician. Far from it. So you won’t see any statistics, graphs, academic references or even the slightest shred of evidence to back up my assertions and conclusions. What you will read however is my view of the current European (and global crisis) based on following a variety of news sources, discussions with people who are much smarter than I am, an ability to recognise bullshit and a healthy dose of scepticism.

Take one look at the current situation: Greece has had one bailout and is looking at a 2nd bailout, Ireland has had one bailout, Portugal is being bailed out and Spain will quite likely follow shortly. In each of the bailed out countries a series of austerity measures is being applied. Services are being cut, taxes are being increased, levies are being introduced etc. In short for the citizens of these countries the cost of living increases drastically. The main cause of the increase of cost of living is an increase in charges by the state for services provided to its citizens. Services that in principle should be funded by the already paid income taxes, sales taxes and social taxes. However the revenue from those sources has been squandered. Instead what we get now are higher & more taxes and fewer services. Private citizens and the private sector are being dealt hammer-blow after hammer-blow. Government deficits have grown to astronomical proportions but even bigger amounts of money are being used to rescue the banks. To what benefit one might ask?

That is indeed the biggest question in this whole twisted tale. Qui Bono? Will this period of austerity caused by fewer services, higher & more taxes and rapidly rising prices bring us to an eventual recovery? The answer is: probably. But another consideration is how long will this take? Will is take 5, 10 or even 25 years? My estimation is that it will most likely be 25 years or more before we see any actual benefits and economic stability if we keep walking down the austerity road.  There is of course a different option. Forget about the “burning the bondholders” argument. Most bondholders have already been repaid. What we can do is restructure the loans, because that’s what they are, that have been forced upon us by the IMF/ECB. We can demand a longer running period, a lower interest rate or even a reduction in the capital. Because that is where the real truth is hidden, neither Ireland, not Greece, not Portugal will ever be able to pay of the loans forced upon them. The EU & the IMF are well aware of this and what we are witnessing is not an attempt to rescue the economies of these countries as it is wholesale asset stripping.

When the shit hit the fan in the world of global finance back in 2007/2008 and it became clear that banks all over the world would just fail overnight the people at the top of the financial foodchain decided that they could never let this happen. So these chose a devious and callous option. In the case of the EU this meant that governments would be strong-armed into accepting loans of an astronomical size and at sometimes punitive intrest rates simply to hand this money to the banks thereby ensuring the continued existence of the financial system. The fact that these loans could never and would never be repaid was not an issue for the (private) banking sector. It was for the IMF/ECB though. Hence they included clauses in the “bail-out agreements” that would hand control of the bailed out countries economic & financial policies over to them. The EU/ECB would dictate internal politics….

What we are witnessing now is wholesale assets stripping on a scale not witnessed since the Soviet armies occupied a large part of Western Europe at the end of WWI. At the direction of the EU bureaucrats formerly sovereign countries are being told to sell of state assets in order to fund loan repayments to the ECB/IMF. The fact that the sale of the these assets will quite possibly leave the country in economic ruination with no state-owned industry or other assets and still insurmountable foreign debts to repay does not seem to matter. It is a case of “get it while you can”. For example Greece has been strong-armed in selling 10% of the state-owned Telecoms company to Deutsche Telekom.  It is no surprise that this is a German company. I expect more chunks to be sold of and also “suggestions” that Ireland sell off Aer Lingus, ESB, Coilte (oh wait that’s already happening) and more. Visions of the Soviets dismantling factories and shipping them lock, stock and barrel to the motherland come to mind. None of this is happening to the benefit of the individual countries or it’s citizens!

So what can be done? There is really only one option; stop playing ball. We need to step out of the EU to regain economic sovereignty and use this renewed independence to dictate the rules of the game. We need to state how much we are paying back, over what time-frame and at what rate. Nothing else will do. This will be a painful step to take as it will bring cause a period of economic hardship but this period will be significantly shorter than the one that will be caused by playing along with the ECB/IMF and whatsmore we will emerge out of this as a healthy economy.

It’s really a simple & straightforward solution but I do not think that any of the governments of the respective countries has the balls or willingness to implement it.


/end rant

It has been impossible in the last few days to miss all the public & political outrage about the Irish Taoiseach (prime-minister) playing a round of golf with Sean Fitzpatrick (the man responsible for running Anglo Irish and thereby the whole Irish economy into the ground) not to long before the Irish State issued a blanket depositor guarantuee for all Irish banks.

Now we all know by now that Anglo, AIB and a number of other Irish financial institutions were already running on fumes by then. A large part of the Irish public and all of the Irish opposition parties now are suggesting that Sean Fitzpatrick and Brian Cowen would have most likely have discussed Anglo Irish Banks performance during this game of golf and still issuing the deposit guarantee with this prior knowledge would make Brian Cowen guilty of “economic treason” as Eamon Gilmore so succinctly put it.

Now my personal opinion is that this is a storm in a teacup and should have very little relevance. First of all Fianna Fail have already more than proven that they are either the most corrupt party that has ever ruled Ireland or grossly incompetent or both. Either way they should be removed from office as soon as possible and will (fingers crossed) not survive the next general election. Seeing that this election will most likely take place in March as I predicted a few months ago there is really no point to force Cowen to resign now. This could quite likely lead to a premature general election and that is really the last thing we need.

Here is why: the next general election is a crucial one as not only has the current ruling party run this country into the ground resulting to debts that the next generation of Irish people will still be repaying, the opposition parties have idly stood by and let this happen. Fianna Fail’s policies and actions were so grossly incompetent that to mount a succesful opposition to them at any point since 2008 would be like scoring an open goal. Instead Fine Gael has been preoccupied by hiding their embarrassingly impotent frontman Enda Kenny while Labour is just spouting the usual rhetoric (bad, bad, bad) while lacking any coherent policies.

This means that we need an influx of fresh blood in our political playing field. While a few new parties have recently been formed and a few more will hopefully emerge soon it will take these new players some time to establish themselves and to mount an effective election campaign. The time left between now and next March is already very short so any less time will relegate these new and much-needed parties to the fringes of Irish politics. And that people would leave the door wide open to a Labour/FG, Labour/SF or even a FG/FF coalition government. It is enough to make me wake up screaming at night….

People who know me personally or those who follow me on Twitter know that I have very outspoken views on politics and how this country should be run. Because my rants are more often than not squeezed into 140 characters I think it is time to flesh them out a bit and put them in some kind of structure. hence a blog-post. Now I expect this to be a long one so I will split it up in several parts to keep it digestible. Please also don’t critisize me for lack of nuances or detail. If I start including those the post will go on for 500+ pages and I will never get any real work done. What I want to get across is a growing frustration with the fact that we are going through momentous times but that a large percentage of people (particularly the ones currently in government) don’t seem to realise that we need to get it righ this time.

There are several levels on which we “the people” are in the shit at the moment. We have a global economical & financial system that is in an advanced state of collapse. We have politicians in our own country, on European level and in charge of the most powerful nations in the world who pander to the populist vote and who have abandoned principle, honor and integrity. The catholic church, still a mainstay in  much of the western world, is losing followers faster than a middle-aged man loses his hair.

On a national level we have a crumbling public infra-structure, a failing health care system, a underfunded educational system ( the majority of primary schools are owned by the Catholic church), violent crime which is beyond the Gardai’s (Irish police) control. We have a economy which is circling the drain and we are governed by a bunch of incompetents who have less understanding of macro-economics than my 10 year old.

So where does this leave us? In my opinion we are going through a metamorphosis; all mainstays & supports in our society are gone. The faith in religion is gone (pardon the pun), financial security (banks, pensions etc.) is gone. Not only are most banks in dire straits, the actual system of banking and the financial industry seems to have been built on smoke & mirrors. The government has failed at all it most basic tasks, it is unable to stabilise the economy, it cannot keep it’s citizens safe, it cannot provide a sustainable living environment for most of it’s citizens, it disrespects democratic vote (hello Lisbon treaty referendum) and it uses tax payers money to bail out their cronies while cutting back on provisions for the lower classes of society (NAMA, health care cutbacks etc.). I can see a realisation dawning where people see that they cannot depend on the nanny-state they so craved. We will have to go back to a system where we will have to do things ourselves. We need a system build on direct rule and direct action. Strip the government back to a bare minimum (public safety, defence, public services etc)  and let the private sector take care of the rest. Issues like trade & economic development should not be handled by civil servants. A civil servant operating in a free market environment is asking for trouble. Services and the provision of them should be based on supply & demand. A bloated government apparatus will only be staffed by people whose only interested is to secure their own jobs rather than serve the people who they represent.  Free market economics will prevent such waste.

Look at the current hot issues in Ireland; the global economic & financial crisis has been aggravated by the overdependence on the (now collapsing) property & construction industry. We have no indigenous industrial base to speak of as the IDA has for decades squandered money away by paying foreign owned multi-nationals to set up base here. As soon as the cost-base increases these companies flee to cheaper shores (something recent developments have clearly illustrated). The government is now in a blind panic throwing money around using expenditure as a measurement of effectiveness. Again it is “form over function”. Several of the largest banks are on the verge of collapse and what does the Irish government propose? A state owned body that will buy all the toxic debts of the banks so that said banks can put the results of their blatant mismanagement behind them and continue like nothing has happened.  The bill for this adventure will be footed by the tax-payer who is already being crippled by increased taxation and reduced spending by the government. To put it bluntly, the people who have the least fault will have to bail out the institutions that are at the root of this disaster. And what would the result off all this sacrifice be? The survival of the same mindset that has brought us here. We would be much better off to let failing banks collapse and to build a new, healthier financial system on the ruins of the current one. This might mean 5-10 years of struggle but if is greatly preferable over 25-50 years of un-imaginable amounts of debt having to be paid of by the taxpayer. That will be you, your children and quite likely your grandchildren.

But lets not blame everything on the state. We have become a society of pussies who expect to be compensated for or protected against every form of discomfort. A large swathe of society prefers to sit on their sofa, stuffing their faces with low-fat crisps watching such mindbogglingly tripe as X-factor, “UK’s got talent” or”next top model” while the global economy slides headfirst into a quagmire. They will moan and groan as they call Joe Duffy but really they are more concerned with the rental cost if a bouncy castle than the effect the current crisis has on our economic competitiveness, our GDP or the tax burden on future generations. They will take legal actions against the owner of a shop if they slip on an icy patch on the way out but they won’t shovel snow from the doorstep of their elderly neighbour. People like myself who blog & tweet slip into the assumption that everyone is as engaged and switched on as we are. WRONG!

Part 2 of this post will follow shortly…