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But that is more regenotiating the terms of the loan and not defaulting. Two different things.
by IM on Fri Feb 4th, 2011 at 03:06:24 PM EST
[ Parent ]
Default is about re-establishing that Ireland, not ECB or the money-markets, decides social policy in Ireland. If the irish voters and the irish politicians can get this and still want to keep the loan/debt solution, fine by me. But as it stands, the common wisdom appears to be debt-> loan from ECB-> must accept austerity.  So debt is one of the points to attack, another is the way ECB has taken it upon itself to run the social policy of memberstates.

Then again, I have nothing against default per se either. The lenders after all gets payed for interest for taking that risk. And I see nothing wrong in deciding to protect those that Ireland deems more in need of protecting while performing such a default.

Politics is about choices, shock doctrine is all about denying any choice except dramatic cuts for those worse off and privatising assets to those best off. And then rushing it through. What we do here is largely to constantly formulating choices in the hope that it gets read and used.

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Fri Feb 4th, 2011 at 03:18:06 PM EST
[ Parent ]
But they did decide their social policy: Neoliberalism it was, low tax - no regulation - beggar your neighbour.

And now you argue they should be free of the consequences of this. So that Ireland has the autonomy to go on the next neoliberal binge.

And you buy in the nationalistic irish narrative: Ireland as perpetual victim, never responsible for anything.

by IM on Fri Feb 4th, 2011 at 03:40:45 PM EST
[ Parent ]
Do you mean that they should accept austerity as the proper consequences for neoliberalism?

And you buy in the nationalistic irish narrative: Ireland as perpetual victim, never responsible for anything.

Ireland is a state, not a person. Since my argument when it comes to irish debt is very similar to my arguments about greek and icealandic debt, I believe that nationalistic irish narrative might not be the common demoninator.

To me you appear to have an either/or approach to responsibility, where ECB can not be responsible for anything as all is the fault of Ireland. Could you please tell me if it is the people of Ireland, the politicians of Ireland or some other person/group that you hold responsible?

A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!

by A swedish kind of death on Fri Feb 4th, 2011 at 04:15:47 PM EST
[ Parent ]
The Irish politicians were responsible for the regulation of the Irish banks. There was  no european banking regulation. Irish banking regulation failed.

The Irish people supported not only FF, but also the their coalition partner and the main opposition party FG. All of them - and the Labour party at least 90% of it - supported the failed Irish economic model. All the other major players of Irish society: banks, business, the real estate sector, local government, the unions, the press played happily along.

Perhaps the roman catholic church was innocent, being otherwise occupied. And perhaps the national association of the travelers opposed the housing boom.

But as far as a society can be made responsible, the Irish society was collectively responsible.

The last big madness was the famous universal guarantee, without consultation of any european partners.

The ECB on the other hand is not helpful now, but has supported the Irish banks two years now. Is it really so absurd to say, this can't go on we need a permanent solution?

Now this could have happened in other countries and in similar ways it did. Everybody likes a real estate boom and low taxes, and everybody likes to blame shadowy foreigners.

But we shouldn't encourage them. Not in Ireland and not in Iceland or Greece.  

by IM on Fri Feb 4th, 2011 at 04:43:38 PM EST
[ Parent ]
_ Is it really so absurd to say, this can't go on we need a permanent solution?_

Yeah, the permanent solution is for the new Dail to renege on the blanket guarantee of all bank liabilities adopted by the previous government in October 2008. This will burn some creditors of the Irish banks. It will be a sovereign default since presumably the guarantee by now has legal standing.

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 Fri Feb 4th, 2011 at 04:54:33 PM EST
[ Parent ]
What do you mean exactly by this? Repeal the guarantee and return to just the general EU wide 20.000 deposit insurance? And then bankruptcy of the troubled banks?

That would actually make sense.

But that is not the proposal of the post and not the proposal of most of the commentators here who want to default on all Irish government debt.

by IM on Fri Feb 4th, 2011 at 05:04:12 PM EST
[ Parent ]
Everyone seems to think the Irish government guaranteed all deposits. That's not what they did.

They guaranteed the entire balance sheet of the banks, from deposits to senior to junior debt to derivatives to whatever.

So bondholders had a government guarantee they didn't have before.

I'm not saying repeal the deposit guarantee. After all, depositors have always been and will always remain the most senior creditors of any regulated bank. No, I'm saying repeal the blanket guarantee of the entire unsecured debt of the Irish banks.

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 Fri Feb 4th, 2011 at 05:32:28 PM EST
[ Parent ]
A unlimited deposit insurance is still a bridge to far. But how helps the fact that the irish government was even madder us now?

The plan outlined in the post above discriminates between foreign and domestic creditors. Do you support that?

by IM on Fri Feb 4th, 2011 at 05:44:15 PM EST
[ Parent ]
No, actually, I don't think that's sensible. It's also contrary to core EU principles and would be challenged it the European Court of Law.

However, as an initial threat in order to bargain down to a sensible position it might make sense.

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 Fri Feb 4th, 2011 at 06:01:49 PM EST
[ Parent ]
Distinguishing between foreign and domestic creditors does make sense: Foreign creditors have a second safety net in their own government; Irish creditors have no such thing. And as a practical matter, Frankfurt and Bruxelles are going to be a lot more sensitive to British, German and French creditors than to domestic Irish creditors.

If the powers that be do not want German taxpayers to bail out Greek sovereign bonds, then there is no reason for Irish taxpayers to bail out German pension 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 02:09:57 AM EST
[ Parent ]
I see this "blame the people" narrative all over Europe. Who who was the primary beneficiary of this neoliberal binge? How much were workers exploited in Ireland? A lot (see below)

[source].

If working people were not the main beneficiaries why are they expected to be the sole suckers that have to foot the bill and not the people they've been making money for?

And tell me (I really don't know): What percentage of national income went to hospitals, to education? Wasn't Ireland among the most unequal countries in the EU? How about the people at the top who made real money out of the bubble?

We had the same discussion with the Icelanders, and look where they are now. And we're having some variety of this discussion in Greece. There is no excuse to pretty much annul democracy and throw a country to the markets, witch pretty much is synonymous to shielding the elites form real damage. And this is not just about Ireland (although Ireland is an especially odious case given that the Irish government unabashedly burdened their own voters with the debts of their banker friends, at the ECB's request): it is about the whole EU periphery (and indeed even the working class EU-core) which, after Merkel is done with her "competitiveness" plans, will become German vassal states with quasi-feudal elites running them. So I personally as a citizen of Greece have a lot of sympathy for Ireland, and will root for them in the rather unlikely case that they manage to knock down this whole theater of vampire bankers feeding off a disaster they invented, by any means necessary. Heck raise a new independence army. I'll come and join as a volunteer, if we don't manage to kick off our own bag of mayhem down here.

Note that the elites where I am are pretty much disparaging the Greek people for not following exactly the sort of road the Irish have "chosen", they then fail to explain how that road led to the exact same consequences when all was said and done was that much better.  

The concept that people are "responsible" for policies that are presented to them by all the "important people" (and I won't even go into the international claptrap concerning the Irish model, and the Celtic Tiger) as inescapable and without alternative, assumes too much of democracy as is currently practiced. Especially if the end result of the bitter medicine they will be forced to swallow is even less democracy, fewer options and a vastly more skewed income distribution.

Having said all that, I think IM is helping a lot in honing the arguments and preempting criticism. So I think that this is becoming a rather useful exchange.

If it's going to a vote: I will sign whatever is agreed upon. As Egypt shows, many humble efforts can have unpredictable results - and what do we have to lose anyway.

One general question to Jake, Migeru and all: what would a similar proposal for Greece look like? Is there anything that Greeks can do to avoid this neolib hell we're experiencing? Apart from mass protests civil unrest and general havoc that is...

The road of excess leads to the palace of wisdom - William Blake

by talos (mihalis at gmail dot com) on Fri Feb 4th, 2011 at 05:55:25 PM EST
[ Parent ]
what would a similar proposal for Greece look like? Is there anything that Greeks can do to avoid this neolib hell we're experiencing? Apart from mass protests civil unrest and general havoc that is...

Ireland is unique among the PIGS in that it has a structural balance of payments surplus, and that its goverment debt is unsustainable mostly because of the ill-conceived blanket guarantee of their failing bloated banks. They would have had a large deficit in 2009 in any case due to the recession, but without several multiples of GDP in zombie banks liabilities the Irish treasury and central bank would likely be jointly solvent.

I think Greece has only the nuclear option left: sovereign default and issuing scrip. But maybe that's a failure of my imagination.

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 Fri Feb 4th, 2011 at 06:09:06 PM EST
[ Parent ]
Yes and the 1 trillion Euro question is: in the medium and in the long run, is the nuclear option better or worse for exactly the people you want to protect - compared to following the road of austerity and "reform" (which will lead to a default managed by the debtors at some point anyway)? Does just sitting and hoping for an electoral change of guard in Germany and France in the next couple of years even make sense?
Or is cutting general income levels in half but preserving their public nature, taxing property and assets and prosecuting tax dodgers among other things, a better option on a 5 or 10 year horizon?

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Fri Feb 4th, 2011 at 06:19:09 PM EST
[ Parent ]
I actually think it is. Sovereign default doesn't imply an exit from the Euro, and if the money markets close down to Greece as a result and the European System of Central Banks temporarily stops clearing payments with the Greek Central Bank they pretty much force you to issue scrip to keep functioning, institute capital controls, or other emergency measures suspending parts of the EU rules. You can always pay any fines imposed by the European Court of Justice a decade later, when the economy has recovered.

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 Fri Feb 4th, 2011 at 06:39:00 PM EST
[ Parent ]
Ah, right blame the ECB. Because the irish elites who created this low tax no regulation paradise are not blame at all. Instead they got you rooting for them.

And Iceland: I still think the glorious icelandish plan to split their banks and give the new part the assets and the old the debts was fraudulent. Especially because the domestic deposits were in the new bank and the foreign deposits in the old. But in the long run they will pay anyway. They already have to some countries.

by IM on Fri Feb 4th, 2011 at 06:24:53 PM EST
[ Parent ]
No I'm not. Burn them. Tax them to oblivion. But the issue is not whether the elites or the people are to shoulder the blame. Under current arrangements workers pay for the debt and the elites (Irish, German etc) are free to make even more money and reflate some new bubble or whatever the magic fairy of unfettered markets tells them to do. How is that fair? At this point getting rid of the austerity seems a prerequisite for even the most basic popular input in the matter. And this is not solely an Irish  matter. Why should we care to protect German (or Irish, or whatever) bankers?

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Fri Feb 4th, 2011 at 06:30:22 PM EST
[ Parent ]
I agree the Irish elites need to be held accountable, in the strict sense of that word.  All those "profits" (sic) need to be seized and used to help alleviate the crises.

Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Fri Feb 4th, 2011 at 06:32:01 PM EST
[ Parent ]
The "well you chose this" option is nonsense.

It's like a spouse discovering that the other spouse is a crook who's defending themselves by saying "You married me for the nice house, so it's your fault I'm a thief."

People are trained - bizarrely - to assume that this economics stuff is far over their heads and they should leave it to the experts without expressing an opinion on it.

But the so-called experts act without oversight or accountability.

When a doctor fucks up badly and kills multiple people, the doctor is - at least - struck off.

Finance has no formal code of conduct, no regulatory body that can ban individuals from working in the industry, and no system for personal accountability when egregious errors are made.

Criminal fraud can be punished, but stupid decisions that ignore even the most basic requirements of due diligence aren't.

Since financiers have no concept of personal responsibility, default isn't just good economic sense, it's also the only option that can send the industry a message about ethical standards.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Feb 4th, 2011 at 07:00:42 PM EST
[ Parent ]
Ah, right blame the ECB. Because the irish elites who created this low tax no regulation paradise are not blame at all. Instead they got you rooting for them.

Did you miss the part where I argued that the Irish oligarchs need to lose their shirts as well?

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)

All the people on the 'evil' part of the list should ultimately end up losing their shirts completely.

And Iceland: I still think the glorious icelandish plan to split their banks and give the new part the assets and the old the debts was fraudulent.

That is a perfectly ordinary bank intervention. There is nothing fraudulent about that, and indeed it is how a bank is put through bankruptcy every month somewhere in the OECD.

But in the long run they will pay anyway.

No. Really, they won't have to pay anybody who isn't going to send a gunboat to Reykjavik.

They may want to pay some of their creditors, because they view their claims as legitimate, or because they want to avoid the political fallout from not paying them. But sovereign states never have to pay their creditors.

- 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 02:30:06 AM EST
[ Parent ]
Of course, that's sometimes how they get non-sovereign.

Align culture with our nature.
by ormondotvos (ormond no spam lmi net no spam) on Sat Feb 5th, 2011 at 10:07:16 PM EST
[ Parent ]
Because the irish elites who created this low tax no regulation paradise are not blame at all.

They're already fucked. Most of them are down to whatever small numbers of millions they managed to squirrel away in the wife's name. They're not exactly homeless and starving, but they're down to a small percentage of their previous "wealth".  The ones that aren't are the ones who were rich before the boom. Some of them are still managing to appear rich, but they're standing in the air at the top of a canyon they just haven't noticed.

by Colman (colman at eurotrib.com) on Mon Feb 7th, 2011 at 09:45:55 AM EST
[ Parent ]
Neoliberalism it was, low tax - no regulation - beggar your neighbour.

So, no cafeteria neo-liberalism allowed? If Ireland takes one bite of that apple they have to eat the whole apple, seeds and all?

Ireland opted to follow that part of the neo-lib agenda that suited it best. Beggar thy neighbor tax policies are de rigueur between the states in the USA and Ireland correctly saw this as a likely option to attract industries. If this was unacceptable it should have been required to be undone before the EMU proceeded to completion.

The real estate bubble in Ireland flowed from neo-lib ideology and practice and its replication in Ireland was cheered as an example of the benefits of this ideology and practice -- until it blew up. In these circumstances it seems entirely appropriate that the Irish state should seek to protect those social services that will allow counter-cyclical spending to alleviate suffering and prevent a debt-deflation economic death spiral.

At the time the EMU process was started the EU and Germany was characterized by rather generous social programs. The neo-liberal agenda has been largely to dismantle this system in the name of competitiveness but with the result of reducing the share of produced wealth going to workers and retirees as wages, benefits and social services.

The terms of the EMU/IMF settlement smack of vindictive opportunism by Germany and the ECB to punish Ireland for clinging to the low tax policy that has provided it with industry and to force Ireland to drastically cut social spending regardless of the human cost. It would be one thing if that policy might work. But that seems to have a vanishingly low probability of happening.  

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 Sun Feb 6th, 2011 at 12:11:42 AM EST
[ Parent ]
I have markedly less sympathy for the Irish "tax competition" strategy than you appear to have. But it is rather rich to hear from a German that the Irish are collectively responsible for their irresponsible macroeconomic policy... when Germany has practised the even more irresponsible macroeconomic policy of wage competition.

A country that passed Hartz IV really has no business whatsoever lecturing others on macroeconomic policy.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 6th, 2011 at 12:45:47 AM EST
[ Parent ]
I am not a country. But that fits to your nationalist policy approach. It is also fine to see that you and your fellow travelers are full throated defenders of irish neoliberalism.

(Actually, unit labour cost in Germany are still higher then in most western european countries)

And whatever exactly helped Germany to master this crisis - neoliberalism it was not.

by IM on Sun Feb 6th, 2011 at 11:54:18 AM EST
[ Parent ]
I think Jake's "you" referred to my comment, and I should clarify that I despise tax arbitrage in all of its forms. I was not so much defending Ireland's approach to attracting industry as pointing out that there is no reason they have to adopt more of the neo-lib agenda just because they adopted this part. I would favor a gradual increase in corporate taxes on multi-nationals doing business in Ireland, up to just below the point where the advantage is eliminated.

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 Sun Feb 6th, 2011 at 03:28:49 PM EST
[ Parent ]
I am not saying they have to adopt even more of the neo-liberal agenda. A roll-back is necessary. They could balance their budget by raising taxes: corporate, income and perhaps on real estate, to prevent a new bubble.
by IM on Sun Feb 6th, 2011 at 03:46:27 PM EST
[ Parent ]
Increasing income tax rates on top earners would likely be a good move. I don't know the specifics of the Irish tax structure, but I doubt that it taxes the wealthy and their estates particularly onerously.

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 Sun Feb 6th, 2011 at 04:27:15 PM EST
[ Parent ]
They have increased taxes at the top a bit, but, anecdotally, a lot of the top earners are in pretty precarious positions now anyway - their incomes are down substantially (my household is down a third, for example) if they're employed or professionals and they're probably carrying investment loans which are becoming pretty onerous (not so much my household, we have a low risk tolerance).

In the short term squeezing too much will kill the golden goose - and increase the stress on the banking system too. Isn't life grand?

by Colman (colman at eurotrib.com) on Mon Feb 7th, 2011 at 09:51:06 AM EST
[ Parent ]
They could balance their budget by raising taxes: corporate, income and perhaps on real estate, to prevent a new bubble.

In the first place, that is not what is being pushed for under the banner of AusterityTM. If you believe that forcing Ireland to honour its debts will result in rollbacks of their neoliberal policies, then you are living in a fantasy world. Pressuring Ireland to honour their debts will provide an excuse for neoliberals - in Berlin, in Bruxelles and in Dublin - to push for wage suppression, dismantling of the pension system, destruction of unemployment protection and collective bargaining and all the other bullshit "reforms" that always get pushed whenever there is a "debt crisis" and "budgets need to be balanced."

Arguing that Ireland should pay its debts by raising taxes on the rich is, in terms of realpolitik, as delusional as asking that the Irish turn down Lisbon in order to permit a grassroots drafting process for the next treaty. It's not gonna happen, and by pushing for it you are aiding and abetting the neoliberals, for whom insisting on debt repayment is a precondition for engaging in "structural adjustment programmes."

In the second place, no Ireland cannot balance their budget by taxing the rich, because Ireland is in the middle of a serious industrial depression, in case you didn't notice. Which means that they can't balance their budget, full stop. They can't balance their budget by taxing the rich. They can't balance their budget by taxing the poor. They can't balance their budget by cutting benefits. They can't balance their budget by taxing corporations. Because they can't balance their budget. Demanding that they balance their budget is buying into the neoliberal idea that governments need to run balanced budgets. They don't. In fact, they shouldn't. Not in recessions, and not cycle-averaged.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 6th, 2011 at 07:36:03 PM EST
[ Parent ]
I don' buy the theory that Ireland can't rise taxes. That is neoliberal clap-trap. FDR did rise income taxes during the great depression. And what ever the situation in Ireland is, it is not a industrial depression. Manufacturing is least troubled sector in Ireland.

I don't assume Ireland will always be depressed. Budgets can and should be balanced over the cycle. Your novel theory: never balance the budget and default regularly can not work.  

by IM on Mon Feb 7th, 2011 at 09:33:31 AM EST
[ Parent ]
Your plan is raising taxes to pay off foreign debts in the depths of a recession? Raising taxes - my taxes, I'll point out - to spend on stimulus I might buy. To pay off private debts that should never have been made public? Not so much.
by Colman (colman at eurotrib.com) on Mon Feb 7th, 2011 at 09:40:23 AM EST
[ Parent ]
You can't balance the sovereign budget in the middle of a depression. If you try, the only result will be crashing your GDP to a level where the tax base erodes sufficiently to restore the sovereign deficit required for the private sector to deleverage.

Obviously, you can raise taxes on the rich, even during a depression. It's actually not a bad time to do it, provided that you have a big enough soapbox to shock doctrine it through. But it won't balance your budget. It will only enable you to make sure that the deficit goes towards building useful infrastructure rather than lining the pockets of your oligarchs. For the purpose of real economic planning, that's a great thing. For the purpose of paying German bondholders, whose bonds mature in less than three years, it doesn't really matter one way or the other.

And this is all Macro 202 (actually, if you look closely at the accounting identities, it's Macro 101 - but most textbooks not to emphasise it). Even the Chica(r)go cultists get this, although they like to pretend otherwise.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 7th, 2011 at 09:52:56 AM EST
[ Parent ]
Irish taxes were between 33% and 37% prior to the crisis. That I think is to low. It should be possible to raise this level to 40-45%.

Or you can cut the level of expenditures to 33-37%. But I don't think you can run a real welfare state on this.

Now regarding the middle of a depression: I don't assume that Ireland will in three or five or ten years still in the middle of a depression. And then taxes can be rised. And debts be serviced.

As for paying back - why? States are long lived. If Ireland wants to keep the debt another fifty years, why not. Economic growth will then make the debt more bearable.

But in the next few years, if not in the next few months Ireland can arrange its public budget in a way that the interest can be paid. More I do not assert.
   

by IM on Mon Feb 7th, 2011 at 10:27:07 AM EST
[ Parent ]
I don't assume that Ireland will in three or five or ten years still in the middle of a depression

I wouldn't be surprised if it was, given that we're meant to be running massive austerity budgets for all of that period.

GNP is going to shrink again this year and probably next year - any recovery will be drowned at birth by further austerity.

Sure, tax rates here are too low, sort of. Effective tax rates may be quite high for the poor because of how VAT and charges for government services are structured. I've been calling for increases in Irish taxes for years.

by Colman (colman at eurotrib.com) on Mon Feb 7th, 2011 at 10:42:59 AM EST
[ Parent ]
But in the next few years, if not in the next few months Ireland can arrange its public budget in a way that the interest can be paid.

No. It can't.

Why is this so hard to grasp? It's Keynes For Kindergardeners: You cannot run a budget surplus during a serious depression. Not enough surplus to pay interest, not enough surplus to amortise, no surplus at all. Full stop.

So Ireland's bonds will have to be carried for the next five to ten years (more like fifteen if Germany insists on practising Austerity) without the bondholders seeing a single eurocent. Now, that would not in and of itself be a problem, if the ECB were doing its fucking job and printing money on demand. But the ECB is labouring under the delusion that governments should be paying seigniorage to the international money markets.

Now regarding the middle of a depression: I don't assume that Ireland will in three or five or ten years still in the middle of a depression. And then taxes can be rised. And debts be serviced.

If the ECB had been doing its job and printing unlimited amounts of money for Ireland, then your proposal would have been something worth talking about. It would still have been odious, because there is no good reason the Irish taxpayer should bail out the Irish banks, so the part of the debt that corresponds to the bailout should be defaulted upon, at the very least. But it would have been within the realm of the possible.

With the ECB practising Austrian economics, however, your plan of "carry now, pay later" is delusional. It can't happen until Weber, Trichet and Stark are fired and replaced with people who understand the real opportunities and constraints that a fiat currency represents. So unless you have a proposal for how to get Messrs. Trichet, Weber and Stark fired and replaced with Keynesian economists that does not involve defaulting on everything with a business address in Frankfurt, I don't see how your plan is anything but a pipe dream.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Feb 7th, 2011 at 01:11:42 PM EST
[ Parent ]
Of course your plan is even more of pipe dream.

But on the ECB: There are 16 member states  of the ECB. If they wanted, they could send 16 Keynesian economist to Frankfurt. They don't do this. Instead they blame the ECB, a beast of their own creation.

by IM on Tue Feb 8th, 2011 at 10:11:01 AM EST
[ Parent ]
Of course your plan is even more of pipe dream.

Oh, I don't expect the extortion to actually change ECB policy.

But when they default, that will cease to be Ireland's problem, and the Germans who get burned can take it up with Messrs. Stark and Weber, who bear the lion's share of the blame for the ECB's stupidity.

But on the ECB: There are 16 member states  of the ECB. If they wanted, they could send 16 Keynesian economist to Frankfurt. They don't do this. Instead they blame the ECB, a beast of their own creation.

Oh, but that is the whole point of this strategy: Pressure the €-zone countries into sending loose-money governors to the ECB.

That said, it really is undignified seeing you try to fob the blame off on someone else - anybody else - other than the last twenty years of German policymakers. The inflation mandate was a German idea - in fact, a German condition for joining the € in the first place. So was the General Stupidity Pact, by the way. And there is no doubt that German policy positions wield a disproportionate influence in the ECB. For that, you only have to look at its actual interest rate policy over the ten years of its existence as a functioning central bank: They have consistently favoured German macroeconomic policy at the expense of the interests of peripheral countries.

When you follow the money, you end up in Frankfurt.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Feb 9th, 2011 at 01:13:30 AM EST
[ Parent ]
Tell that the Weber. Shouldn't his resignation put a little dent in your "the germans runs everything" conspiracy?
by IM on Sat Feb 12th, 2011 at 05:41:28 PM EST
[ Parent ]
Merkel runs Germany.

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 12th, 2011 at 09:31:43 PM EST
[ Parent ]
I thought the Bundesbank?
by IM on Sun Feb 13th, 2011 at 07:54:44 AM EST
[ Parent ]
Weber's ouster is good news. Now we just need to get rid of Stark, and we'll have a shot at getting somebody sane in office.

But it doesn't change the fact that the ECB has been consistently favouring the surplus countries - of which Germany is the most prominent and powerful - and has for far too long been pandering to German inflation neuroses.

Incidentally, you should be happy about this outcome. Weber was the most significant obstacle to Ireland's debt being repaid in full, due to his insane insistence that the ECB shouldn't carry it at below market rates until the crisis was over.

- Jake

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

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Feb 13th, 2011 at 12:31:49 AM EST
[ Parent ]
Actually, all 27 EU member states. See the ECB General Council page.

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 Wed Feb 9th, 2011 at 02:24:43 AM EST
[ Parent ]
But the ECB is labouring under the delusion that governments should be paying seigniorage to the international money markets.

But that is much too generous an assessment of the mind set of the ECB. Rather than laboring under delusions, they are much more likely acutely aware of the ire they would recieve, the hit their financial futures would take, and the general opprobrium they would endure were they to deny their private sector patrons the seigniorage to which they feel entitled. They are probably at least aware of the arguments that they can create money without seigniorage, but also aware that this is like a third rail for central bankers in a neoliberal economic environment.

It would be very interesting for Trichet to be asked by, say an MEP, why he has not considered issuing money without siegniorage to help the recovery of banks and central banks that threaten the stability of the entire system. The answer, if truthfully given, would be that so doing would undo too much of the narrative that underlies existing policy and would harm the beneficiaries of the neoliberal policies -- the very wealthy.

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 Tue Feb 8th, 2011 at 02:46:29 PM EST
[ Parent ]
And whatever exactly helped Germany to master this crisis - neoliberalism it was not.

On this I believe we can agree. One thing that has helped Germany for at least the last decade has been that they have been able to set important aspects of macro policy to suit their perceived needs regardless of the consequences to other countries. The peripheral nations have been out of phase with Germany in their interest rate needs and are receiving ever decreasing sympathy for their plight.

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 Sun Feb 6th, 2011 at 03:37:12 PM EST
[ Parent ]

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