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I labour under the impression that you have built a narrative* where the entire debt of the Irish state is hold by "evil" foreign actors,

It pretty much is. More than two thirds of the Irish national debt is the direct result of the 2008 bailout of the Irish banks - a bailout whose overwhelming beneficiaries were foreign banks who failed to exercise due diligence in their lending during the bubble years.

Them's the facts. Not my fault you don't like them.

who for some unclear reason deserve to lose their money.

Well, if you lend money to a bank engaged in massive real estate speculation, then you need to lose your shirt. And if you have a business address on Canary Wharf, then you need to lose your shirt on general principles.

A bank or multinational company who resides - probably because of the low corporation tax - in Ireland is good and should get interest and capital on their bonds.

Uh, no. That's not what I said. Did you miss the part where I said that companies that are important to the productive economy should be paid, no matter where they reside? Here's a hint:

Then you make two lines on each of the two lists: One line between people you really, really want to save (ordinary bank depositors, industrial firms, etc.) and people you kinda sorta want to save if you can (private pension funds, non-toxic investment banks - if you have any of those left - etc.), and another line between the people you kinda sorta want to save and the evil people who should take a long walk off a short pier (bookies, toxic investment banks, everything with a business address on Canary Wharf).

Then you mix the lists like this:

Domestic need-to-save
Foreign need-to-save
Domestic want-to-save
Foreign want-to-save
Evil (foreign and domestic)

Now, it is true that domestic Irish bondholders need to be taken care of before foreign bondholders. There are two reasons for this. The first reason is practical: Foreign bondholders can appeal to their own governments for bailouts if the Irish government cannot honour their bonds. The second reason is political: As long as the ECB refuses to print money on demand to support a Keynesian counter-cyclical fiscal policy for Ireland, the ECB's constituency should feel the pain before the Irish people.

A company or bank that has the misfortune not to have resettled in Ireland and still resides elsewhere should lose everything.

No, firms which serve a real economic function should not lose their money. Deutche Bank and Goldman, however, should.

So my mutual regional bank, who has perhaps bought some Irish bonds in the past, is evil and should lose everything.

Yes. Banks are very, very low on my list of businesses that need to be saved.

The equivalent Irish mutual bank, who has participated to its heart delight in the property bubble and regularly showered local Fianna Fail politicians with money is good and should take no losses at all.

Well, no. Again, I refer you to the part of my diary that you appear to find it difficult to understand:

Then you make two lines on each of the two lists: One line between people you really, really want to save (ordinary bank depositors, industrial firms, etc.) and people you kinda sorta want to save if you can (private pension funds, non-toxic investment banks - if you have any of those left - etc.), and another line between the people you kinda sorta want to save and the evil people who should take a long walk off a short pier (bookies, toxic investment banks, everything with a business address on Canary Wharf).

Then you mix the lists like this:

Domestic need-to-save
Foreign need-to-save
Domestic want-to-save
Foreign want-to-save
Evil (foreign and domestic)

The equivalent Irish mutual bank should also lose its shirt. Only thing is, the Irish banks are mostly already insolvent, which is why we're having this conversation in the first place.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 5th, 2011 at 07:11:38 AM EST
[ Parent ]
Well, we view the basic facts different.

There also seems to be a value dissonance. I like my regional public bank and my regional/local saving bank. I think the are a valuable part of the German banking system and should be defended against the ravaging neoliberalism. As should be the equivalent parts of the banking system of other European countries. (And the state bank of North Dakota)

And you do discriminate against other Europeans:

Domestic need-to-save
Foreign need-to-save
Domestic want-to-save
Foreign want-to-save

A clear hierarchy of needs against foreigners.

by IM on Sat Feb 5th, 2011 at 07:28:21 AM EST
[ Parent ]
There also seems to be a value dissonance. I like my regional public bank and my regional/local saving bank. I think the are a valuable part of the German banking system and should be defended against the ravaging neoliberalism.

Well, yeah. If there's enough money to go around to keep banks from losing their shirts, then local banks and state-owned banks should be at the front of the queue.

But the fact is that if a bank becomes insolvent, there are established procedures to resolve that situation without any major loss for the real economy. The bank's management is decapitated, the assets sold off, and its shareholders and unsecured creditors get to take a haircut. But the economic function - credit analysis, information gathering, transaction clearing and money creation - will still be carried on during and after a bankruptcy.

When a manufacturing firm goes bankrupt, on the other hand, there is a significant risk that it is going to be disassembled and sold as scrap. Which destroys its economic function. And when a pension fund is insolvent, retirees get shafted. So all in all, if you have to shaft someone it's better for everyone, except the shareholders and management, that you shaft a bank than a manufacturing firm.

And the proportion of banks that are simply evil is arguably higher than the proportion of manufacturing firms that are simply evil.

And you do discriminate against other Europeans

Yes, because foreigners have another safety net.

In the best of all possible worlds, the EU would come together and make a list of firms and individuals who needed to be bailed out for the common good, and another list of firms and individuals who need to go whistle for their money. And then the EU would, collectively, bail out the people who needed to be bailed out.

In the world we actually have, the EU is not going to bail out the Irish retirees. And while the German government might bail out German retirees, it isn't going to bail out Irish retirees. So shafting the foreigners in preference to the Irish is the only way the Irish government can incentivise other governments to lend material support to a rescue operation that could ensure that nobody had to be shafted (except the hedge funds).

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sat Feb 5th, 2011 at 08:03:04 AM EST
[ Parent ]
Uh, is your German regional public bank insolvent?

Keynesianism is intellectually hard, as evidenced by the inability of many trained economists to get it - Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sat Feb 5th, 2011 at 08:17:16 AM EST
[ Parent ]
I hope not. Sparkassen and Genossenschaftsbanken tend to be the healthy part of our banking system. But if the great lets default plan succeeds, they can get hit too. For no good reason.
by IM on Sat Feb 5th, 2011 at 08:31:30 AM EST
[ Parent ]
If they get hit it will be because they could not resist investing in what should have been an obvious raging real estate bubble. That is a good reason, regardless of where the bubble occurred.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Feb 5th, 2011 at 06:03:53 PM EST
[ Parent ]

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