peterms

Another little European difficulty for Mr Cameron.

Here's a good article on what's going on.

I was trying to find out about this, as it escaped my attention at the time, and it's just been clarified in the Guardian.

I have some difficulty with the notion that we are lending money to "Ireland". What's happening is a bailout of an interlinked transnational network of banks. These banks have been minting money through a variety of dodgy mechanisms, with some variations in different places. In Ireland it was more about extending credit to property companies without proper checks being in place, in the US it was more to do with assembling dodgy portfolios of poor risk mortgages, getting rating agencies to rate them AAA, insuring them against the inevitable collapse, and pocketing the cash. In all cases, the assumption, correctly as it turned out, was that governments would step in to socialise the losses. Banks keep the gains, we pick up the losses. The gainers in all this are the bankers, bondholders, and speculators. The losers are the people whose jobs will be lost and services closed, in order to effect a transfer of resources from poor to rich. In the Irish case, some money will be lent by the UK and others. We will make some sacrifices in order to make the loan - other choices foregone, more jobs lost, more services closed, that kind of thing. The Irish people will owe the money, so more crap in store for them too. The people who will benefit from this will be the companies, speculators, bondholders who own the banks, because otherwise they would have had to bear the cost of the recklessness and utter irresponsibility of the banks. As Dave says, it's about helping out a friend in need. But the friend is not who it seems.

Cowen is quoted in the papers this morning saying that changing the corp tax rate didn't come into the discussion and isn't a condition, which is surprising if true. As for the single currency, I don't see how it can work as it is, or why the measures now proposed will actually deal with the underlying issues.

Your post stated that the (Labour) government embarked on a spending spree. That's nonsense. Public spending tends to vary only slightly over years (didn't the tories this week say how close their spending would be to what the last government spent?). My post said that the problem was private debt, not public deficits. You suggest that we are saying the same thing, when we are plainly not. Your comments for the most part make no sense. Though the final comment which I have quoted is one with which I agree. Hmm, narrow. Socialists tend to want to deny our imperialistic past, where we ruled large parts of the world, yet at the same time seem to want us to interfere in other countries. Iraq and Afghanistan mean nothing to me. If they are dominated by 'bad' governments, so what? I don't think the Chinese rulers are very cuddly, but successive governments in this country seem happy to cuddle up to them. Basically there are bad governments and oppression everywhere, but I don't think that it is our role in the world to protect the civilian population of foreign lands from their own people. If that is a 'narrow horizon' then so be it. My view is that we should treat other countries, like other people, as we would wish to be treated. You clearly don't feel the same. If you think that exploitation, invasion, undermining and so on are perfectly acceptable, then I think we are so far apart that dialogue is pointless. You also seem to miss the point by a remarkable extent. It's not that we uniquely have a role in protecting people from their own governments (though I think we as others, have a moral duty to do that, which usually, like in Rwanda, we fail); it's that we should stop interfering in other countries for our own benefit.

You must live in a complete fantasy land. The biggest single problem with the economy (and even more so with Ireland's) is that it has largely been in thrall to a boom in house prices based on - well, nothing , really, other than telling ourselves that houses are worth more each year. The biggest culprits in this are the financial institutions, who profited immensely from selling this myth, and from retailing their financial "products" (the very name should make you realise there's some charlatanry about). The second biggest are we, the general public, who were so enamoured of the three card trick that we failed to apply the common sense test to what we were being told. Yes, we can get richer every year by doing nothing! Yes, it's great! Yes, it will last forever! Some way after that come governments. Thatcher was especially culpable, actively looking for ways to profit her mates and take money away from those her narrow Grantham upbringing had conditioned her to believe were workshy scroungers (a term far more suited to the likes of Fred Goodwin and chums). And yes, Brown as well. His claims of having relegated boom and bust to the history books were hubristic and misplaced. But not malicious and intentionally destructive, like most of the shite talked by Thatcher. And a stable economy! Stable as in the horse has bolted, perhaps, but in no other respect whatever. The economy in 1997 was well on the way to being what it is now, overly dependent on private debt funding the purchase of imports and financial "products" which enriched the parasites in the financial "industries". It is this which has brought us to the current state of collapse. Brown didn't challenge this or move us off the path, but neither did he create it. As for Blair, he wouldn't have had the first idea about what was happening, and it seems a bit like bullying even to expect the silly tart to know anything about it. The notion about "small budget deficit" as a synonym for "responsible government" is of course economically illiterate tosh. Government deficits are a useful way of helping the economy. The real problem is the level of private indebtedness, sucking in imports and fuelling a mad and unsustainable house price bubble. And yes, your views on Iraq come as no surprise, as I indicated previously. Pretty sad, really. How narrow your horizons must be.

If you mean the Iraq war, then "crimes" is a suitable term. You probably don't, though. You probably mean the economic mess, in which case you really need to look a bit more closely at the impact of financial deregulation which, though it certainly wasn't her personal brainwave (did she have any?), Thatcher implemented fully and without the slightest quiver of doubt. It's probably been the single biggest factor in the utter, total mess we and so many other countries are in. Well Bliar and Brown took the baton and sprinted with it. Establishing the FSA was effectively that **** Brown's legacy to the country. A bit like asking a rowing boat to contain a drug smuggling operation based on a thousand high speed inflatables. The problem was not the rowing boat, but the smugglers...and of course those who gave them licence to operate. I see as well as baling out the shortsighted fuckwits in the banks, we're paying multiple millions to their chums in the accountancy firms, for "consultancy" which stopped short of offering advice which could have offset this crisis, and "auditing" which didn't quite reveal what was going on.

If you mean the Iraq war, then "crimes" is a suitable term. You probably don't, though. You probably mean the economic mess, in which case you really need to look a bit more closely at the impact of financial deregulation which, though it certainly wasn't her personal brainwave (did she have any?), Thatcher implemented fully and without the slightest quiver of doubt. It's probably been the single biggest factor in the utter, total mess we and so many other countries are in.

Danny Mac's new one. Not funny, just

That's a real pity. I was looking forward to a few more frank comments made after a good lunch.

The problem Cameron perceives is that Young made the remarks, giving people an insight into what he thinks. The problem I perceive is that the remarks accurately reflect what he and others running the country really think. If it helps people understand that particular worldview, then carry on, your lordship. After all, we're meant to be starting a "transparency" project, I understand. A bit more straight talking instead of soothing platitudes would be good. Next up: "Actually, we're not all in this together"?

Pretty damn good.

The Irish crisis is hardly thought of as material for poetry. Still, I happened on this in the Guardian comment section, and since it's not a bad poem and also a good comment on the situation, thought I would spread it more widely:

Let me compare thee to a two-bed semi: estate agents get poetic Agents given poetry lessons to help them sell houses

Benefit rates change each April, based on inflation rates the preceding September.

German bondholders mainly, according to Guido Fawkes.

Ok, not on it's knees. How about leaning forward, that OK for you ? I forgot it was now a Global powerhouse again. On its knees might be an understatement. In a critical condition may be more appropriate. The relatives are arriving to cast an eye over the furniture and valuables, and Dr Shipman's taxi is just pulling up outside.

Another interesting contribution from the Guardian's comment section:

Unless we have a ready made system to replace global capitalism that can be parachuted in and universally agreed to on the day we tell 'the man' to go and swivel, I'm not sure what other option we have to paying our debts. Unless we want to bin free trade and globalisation, we will have to compete with countries whose 'austere' social systems and wage structure would give your average European (steeped in the entitlement culture) a heart attack. How we achieve that is anyones guess and may be too painful politically to even attempt. Which leaves option one.. I'm not advocating defaulting on debts. However, neither do I think we should just do as we're told by the people who hold the debt. Who are they anyway? A mixture of bond traders, pension funds, banks; in many cases, our own citizens - so much for "selling our soul"; in many case, we own the debt, not owe it; it's part of our private wealth. And yet the loudest voice among these is the bond traders, the speculators, the short-term asset-strippers with the least interest in or commitment to the country where their cash is deposited today. It's like taking financial advice from a burglar. It's true that there is an important point about "confidence", and this mystery ingredient can cause a disastrous run on a currency which governments struggle to cope with, or as in Black Wednesday, fail. I don't think though that this means we must simply do as we're told by some spotty 25-year-old trader and their expat, non-dom, non-tax-paying bosses. We need a plan which is credible, even if it's not the standard IMF/bond traders "crap on the poor" idea. For me, that means government intervention to reduce unemployment, tackle tax evasion, and invest in longer-term assets like education, sustainable energy, and the kind of manufacturing which will be exportable. The current approach, cutting the legs away from long-term investment while making spiteful and counterproductive short-term cuts, just looks clueless. A bit like Osborne visiting Ireland and concluding that their approach, and that of Ben Bernanke, were the future. Arse.

Well it is the EURO that is the problem - you can't have moentary union without political union. No it's more that you can't take the benefits of being in the Euro without any restraints. Whether the restraints come from a central government or from the individual countries themselves. Not all countries in the Euro have had this problem and the countries that have will have their domestic finance policies dictated from Brussels once they take a bailout. Yes indeed. Being in the Euro first and foremost means you no longer have a sovereign currency. You have given up the ability to devalue, and to create a deficit in your budget to counter any problems the economy is having. It's like being the UK one day, and choosing to be Northumberland or Rutland the next. Your monetary policy will be decided in the interests of a far larger area of which you are a pretty insignificant part. The benefits to Ireland came from membership of the EU, not from the euro. When I was a kid, we used to make up parcels of old clothes to send across to relatives in Ireland. 15 years later, driving around Ireland, it seemed every second farmhouse had been abandoned and a new house built about 30 feet away. This change was not the result of endogenous growth. But neither was it the euro, which didn't yet exist. It was probably the wider benefits of EU membership, especially for a country with a large peasant class, like France, via the CAP. What's interesting about the euro is that it was first proposed several years before the US collapsed the Bretton Woods system, but was introduced afterwards, and yet proceeded despite the new advantages to single currencies in the light of that pretty momentous change in 1971. Neither do the countries who have bought into it appear to have thought too much about how it restricts their own freedom for manoeuvre, and how that changes of 1971 required a reassessment of the options. The loans which Ireland may be required to take will come at a high cost. Like any loan, they will safeguard the position of the lender, while caring little or nothing about the position of the borrower. If they weren't in the euro, their position would be stronger, though maybe not even then strong enough.

I think the notion that ths this is manufactured panic is barmy, if anything we are not paniced enough because it seems to me like the whole thing is going to go to rat shit. China and the US facing off in a currency war, the euro dying in its current form when the debts of Ireland, Spain and Portugal need to be taken on by the ECB.. I think we should probably be shitting ourselves tbh, but we'll see. The part I mean is manufactured is the panic about the deficit. (Not much else being manufactured these days). Yes, there's an enormous problem about the world economy. The main problem as I see it is the emergence over several years, many years, of two massively destructive forces, closely linked. First, the growth of the finance sector at the expense of the real economy. Second, the growth in power of financial institutions, irresponsible, footloose, short-sighted, selfish, able to make governments pursue self-defeating agendas in order to profit themselves. In the face of that, playing along with the notion that there's a massive problem about government budget deficit and we must sacrifice our long-held rights, is stupid in the extreme. Problem is, we have a government who hold allegiance to the financial institutions which most of their ex-classmates work for, and if you ask them to choose between the interests of bankers or ordinary people in south Wales, Tyneside, Glasgow or pretty well any other conurbation outside Basingstoke and Beaconsfield, it's a safe bet who they'll go with. Today's news is case in point. Ireland saying they don't want a crisis loan (because of the terms it would come with, no doubt), and flunkies from bond management firms telling them they'd better get on with it, sharpish. Guess who will win. Sovereign governments reduced to dancing to the tune of greedy investors, happy to capsize the economy for years to come if it makes them a few quid. Shocking, and unacceptable.

Pretty swingeing cuts These are things they've wanted to do for some time. Shut the law centres, stop people getting help with employment tribunals. It's one more example of using this manufactured panic to push through measures which they would struggle to get through in more normal times. And it's not about the money, it's about redrawing the lines of power between rich and poor. These measures are what people like the CBI and Institute of Directors will have been lobbying for over private dinners and chats on the terrace. Mind you, it would be helpful to have some sort of yardstick by which to measure the claim that it's about saving money. For example, identify the highest bonus paid to a banker last year and this year, average them out, and for each new attack on our rights, calculate how many of the very top bankers' bonuses that equates to. That might put into perspective first the money saved compared to what we can apparently still afford, and second the claim that "we're all in it together".

Certainly mispricing, but surely the total amount of private debt as a proportion of GDP was the big underlying problem, with the effects of the mispricing acting as the trigger to crystallise the risk? The mispricing creates the debt mountain. You can't buy something at the wrong price until it has been offered at the wrong price. Yes, second sentence is unarguable. (Possibly excepting Man City - we'll buy him, whatever it costs). On the first though, another way of looking at it is that the western economy as a whole is undergoing a shift from being mainly an industrial economy, where people buy things, to being mainly about debt-driven consumption, allowing a level of spending and profit which outstrips the actual productive capacity of the economy, being increasingly based on speculation. The most obvious example is consumption financed by increasing house prices. From that perspective, pricing is the symptom, not the cause. Or possibly it's just two sides of the same coin - continued expansion of debt-funded consumption is impossible, but we're not keen to revert to a level of consumption based on production of real things and the consumption potential arising from that. So the financial economy starts to eclipse the real economy, and speculation and mis-pricing carries on until it collapses. But if the financial "products" were correctly priced, they wouldn't be sold, and the bubble couldn't carry on growing.

Certainly mispricing, but surely the total amount of private debt as a proportion of GDP was the big underlying problem, with the effects of the mispricing acting as the trigger to crystallise the risk? Well, the Austrians share an approach with some of those who saw it coming, but the criticism is that they have tended to shy away from producing proposals which could be falsified, tending to speak in more general terms. The "stopped clock" and "permabears" criticisms reflect that view. There's a review of forecasts by Bezemer, quoted approvingly by Steve Keen (as one of the ones who got it right), suggesting that it was also important to put some timeframe on the prediction for it to be taken seriously; a test which most of the Austrian school are said to fail. Didn't the ARMs have a structure which made them suddenly unaffordable? Weren't they just a deferred-interest vehicle, with the interest being rolled up and added on later (ie still adding to the unsustainable debt problem, but kidding people into thinking they might be able to afford it)? Fisher and Minsky sound interesting. I agree that the left schools of non-Keynesian thought share some common features of analysis with the Austrians. Where they differ is in the policy prescriptions which result, with the Austrians being so closely linked to laissez-faire and lack of government intervention. In the UK, the Austrian school will have to wait a long time before people forget the close association of Thatcherism with Hayek's ideas.