Irish Politicians Lie, Cheat and Steal – Shock!

I’d just like to call attention to this extremely interesting piece on why Irish politicians are keen to cover up regulatory breaches in a certain company based in Ireland.

This country is truly in the toilet – and the only way out is to stop the lies and the deceit and… well… man up and face reality. The Irish political elite have strange justifications for this sort of thing. They claim that we need to hush up in order to prevent the world from seeing the rot at the heart of Ireland Inc. Some people have disagreed with this approach from day one – claiming that it was a volatile recipe for self-destruction – but they were not only ignored, but marginalised and made to feel like foreigners in their country.

This has to end. This isn’t a third world country (yet?), and it shouldn’t be run like one. These people need to be held to account – and I’m not just talking about the politicians. But to end it is so much more difficult than the outside observer can even imagine. The rot runs deep – and honorable souls generally go into exile in disgust. This could be a great country – this could be a small, but powerful economy – but the crooks have to go… all of them. And I don’t just mean ‘out of office’ – I mean ‘to jail’.

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Julian Assange’s Testimony

I’ll be back in a few days for economic commentary and the like – but I feel I have to highlight this video. Presenting: Julian Assange and WikiLeaks – sans spin! Listen carefully – there’s a million and one insights into how the media works…

 

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Happy Christmas!

Well, I’m sure as hell not doing a post today – my head is killing me from… er… certain festive transgressions. But here’s a Christmas present… Presenting, the best documentary ever made (well, second best – Curtis’ ‘Century of the Self’ is actually better)! Adam Curtis’ ‘The Trap’ was produced for the BBC back in 2007 and is absolutely incredible. If you haven’t seen it already – well, just watch it:

The Trap

If you have seen it, consider one of his other incredible documentaries:

Adam Curtis’ Films

Oh, and a quick plug of Curtis’ blog – which I often reference and write articles on – for the curious or addicted reader (he’s got a wonderful post on pandas and geopolitics today…):

Adam Curtis’ Blog

UPDATE: It would seem that I’ve forgotten to include links to Curtis’ other incredible film offering which, some time ago, me and another few eager bloggers tracked down and made available on the internetz. It’s called ‘The Living Dead’ and it’s up there with the best of Curtis’ work. It can be found here:

Part I — Part II — Part III

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Interview With the Director of ‘Inside Job’ on the Corruption of Academic Economics

Very interesting:

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Euromorons: Was the Eurozone Doomed from the Very Beginning?

Eurovision contestants: Music this bad!?! And you expected stability!?!

Professor Geoffrey Underhill ran a very interesting article today arguing – well… arguing that the Eurozone is not only bunk, but has been bunk from the very beginning. I’ve been coming increasingly to think this over the past few weeks.

As my initial optimism that the EU might do the right thing and begin undertaking fiscal stimulus in the peripheral countries gradually fades (I know, this was outlandish from the beginning – but, even if I saw it being seriously discussed I’d be happy enough), I’m coming to think that the Eurozone, at least in its current manifestation, should probably call it a day.

So, let’s run through Underhill’s most pertinent points.

First of all, he points out that the EU presumed inherent stability in just about everything it did – Underhill refers to this as the ‘stability culture’. It probably has historical roots, of course. The EU and its predecessors were founded on the idea of inter-continental stability. All the EU propaganda broadcasts scream this, both those of today and those of yesterday – it’s all about harmony and coexistence, they insist. But, according to Underhill, this crassly optimistic ideology seeped into the very heart of Europe – bringing its leaders to think that stability and harmony were a sort of given.

Of course, as Underhill points out, there is no reason to suppose that financial stability – I’d go one further and say: stability generally – is the historical norm. But once again, the Eurocrats were deafened by the songs they sung amongst themselves.

Underhill goes on to highlight a number of key issues that were simply ignored by the Eurocrats:

(1) The actual place of the Eurozone in the global economic and financial system was never considered by the Eurocrats in earnest.

Underhill points out that while the Eurozone is relatively independent as far as international trade goes, it is far from indepedent when it comes to its being tied into global-scale financial and economic arrangements.

This freedom of international capital flows within the Eurozone was a major problem from the outset – and deserved far more attention than international trade. But it was more difficult – and, perhaps, more ideological awkward – to regulate; so it was, for the most part, left alone.

(2) There was a truly godawful collection of institutions set in place for crisis-management. This was, again, a product of the ‘stability culture’ that liked to think itself above any sort of crisis – this was a culture that was more at home watching the silly multi-culturalism-cum-assimilationism of the Eurovision than considering what institutions should be put in place to deal with intra-European crises.

(3) Political autonomy. This is so obvious it almost doesn’t deserve a mention. Just look at how European countries – particularly those in the periphery, like Ireland – are trying desperately to reconcile their national interest with the interest of the abstract entity known as the ‘Eurozone’ at large. Populations – particularly voting populations – can only take so much. They don’t, after all, buy the propaganda – that was cooked up purely for the self-satisfaction of the leaders – for them its all about the little things. You know, like: standards of living and employment prospects.

(4) I’ll let Underhill have this last point himself:

“The euro enhances the cross-border market forces already at work and was explicitly intended to do so.”

This ties all the previous points together. With a single currency, capital-flows found it easier than ever to cross borders – and this led, in many cases, to the undermining of national interest. But not in favour of some mythical pan-European interest – oh, no! – instead it lent favour to the interest of callous private investors who, as we have seen amply demonstrated throughout the present crisis, show no allegiance to anyone but themselves.

These are the key problems. And, as we now see, the EU has no real tools for dealing with any of them – let alone any plan of action to take should all these problems burrow out of the woodwork simultaneously, as they are doing now.

My initial optimism about the possibilities of a collective European fiscal response are quickly drying up – indeed, barring in the heads of a few, a very few, commentators and academics, these possibilities never really existed.

And as for the EU? Well, they seem about as confused as the Croat Eurovision contestant who, backed by some of the cheesiest muzak you’re likely to hear this side of Bon Jovi, asked, somewhat innocently: “Who put curry in my rhubarb?”

And that’s what the entire Eurozone should be asking itself right now. Who put curry in our rhubarb? Who, indeed?

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Obama’s Tax Deal: Minimum Stimulation

Obama's tax deal: Disappointing real economists since 2010

So, Obama ‘bipartisan’ tax deal is on the table – ‘bipartisan’ being a synonym here for ‘wholesale selling-out’. Yes, Obama and his wussy supporters have put together a walking corpse of a bill – the key focus of which is to continue giving massive tax breaks to the rich.

As Dean Baker points out in a recent Guardian article, some economic commentators and politicians are getting all hot and bothered over the tax deal – calling it a ‘second stimulus’ and claiming that it’s going to save the world economy. Of course, this is complete and utter nonsense – in truth, the tax deal is going be about as stimulating as your average prayer service.

First of all, much of the tax cuts are nothing new – they’re simply a continuation of those initiated by the Reptilian president Bush Jnr back in ’01. Baker estimates that some $730bn of this $900bn tax deal will provide exactly zero stimulus – because they’re just carrying on policies that were already in place.

Further, Baker estimates that the only true stimulus provided by this scheme adds up to about $70bn – that’s a measly 0.5% of total GDP.

Indeed, Baker insists that 2011 will be another year of sluggish growth and persistent unemployment. Why? Because, although there is some stimulus coming from these tax breaks – tiny as it may be – there are other powerful trends working in the opposite direction. Baker includes among these: falling house prices; increased interest-rates and, perhaps most importantly of all, the discontinuation of the real stimulus package – enacted in 2008 – in the first two quarters of 2011.

Another important trend that has been driving economic growth, but which will soon coming to an end, is the stockpiling of inventory. Baker puts it as such:

Over the last four quarters GDP growth averaged 3.2 percent. However, final demand growth averaged just 1.3 percent over this period. In the most recent quarter, inventories were accumulating at almost the fastest rate on record. It is unlikely that the rate of inventory accumulation will accelerate further. Rather, the rate is likely to slow, meaning that inventories will be a net drag on growth in coming quarters.

What Baker means is that companies are stockpiling goods – presumably in anticipation of the recovery that is supposedly around the corner.

I think what Baker is alluding to here is a Kitchin Cycle. These are economic cycles that take place in 3-4 year periods. After downturns firms react to the better business climate – or, more importantly, the perceived better business climate – by filling up their warehouses with unsaleable goods.

Baker seems to think that the growth phase of this Kitchin Cycle is nearing its end (I might email him about the specifics of this, as its interesting – and update this article accordingly). That’s going to have a major impact on GDP growth – indeed, Baker’s colleague, David Rosnick, has been pointing to this possibility for some months now.

Before I finish, a note on the tax cuts themselves. Some economists – economists who are bad at their jobs and averse to reality – see giving tax cuts to the rich as an excellent means to stimulate the economy. The idea is that if rich people have more cash, they’ll invest it in productive industry and start the economic machine rolling once more.

What these economists don’t take into account – although I’ve been saying it on here for some time now – is that, if the investment climate is bad (due to insufficient aggregate demand), there’s every reason to believe that rich people will simply start speculating.

Indeed, we seem to be already seeing the effects of this speculation in the commodities markets – which in turn, seems to be leading to biflation.

As far as I can see, these tax cuts merely continue this trend – and, in the long-run, will be damaging to the world economy at large. But then, I suppose when stimulation is minimal, economic actors will have to seek out their kicks elsewhere – and, these days, the stock markets are as exciting as any casino.

UPDATE: Well, I emailed Baker and it turns out that he wasn’t thinking in terms of a Kitchin Cycle at all. Although he conceded that what we’re witnessing could have elements of a Kitchin Cycle to it, he explained that the most important cause was probably the build-up of housing inventories and the decline in housing prices. I’d tend to agree.

Anyway, this doesn’t substantially alter the substance of the above article, so I don’t think I need to change anything – I’ll simply point out that more emphasis should be placed on the house price/housing inventory angle, and less on the Kitchin Cycle, build up of commodity and goods inventories angle.

It should provide a warning though – and one that I’ll be more careful in future to heed myself: be very careful when looking for simple, eternally recurring historical patterns in the economy – there’s every chance they don’t exist. Only tendencies truly exist – and these intermix in an infinite number of different ways, causing an infinite number of different patterns and constellations.

UPDATE II: Baker has just done a quick article on inventory accumulation – I wonder if our email exchange had anything to do with it… my God! I’m arrogant!

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Anglo Irish’s Off-Sheet Balances – AIB: Worth a Damn?

Just to point to a post about Anglo Irish and AIB over at Yves Smith’s Naked Capitalism blog.

Smith points to this statement released from Brussels yesterday regarding the Irish banking system. She highlights two interesting passages. First of all:

Anglo Irish Bank will furthermore receive a guarantee covering certain off-balance sheet liabilities (derivatives, clearing transactions and transactional arrangements) that will ensure that Anglo Irish Bank can continue its daily activities as a going concern.

How much are these off-sheet liabilities worth? Good question. Smith anticipates somewhere in the €35bn region – ouch!

Secondly:

With regard to Allied Irish Bank, the final decision will depend on the Commission being satisfied that the bank will be commercially viable in the long term without further injections of taxpayers’ money, that there is a significant contribution by the bank’s shareholders and subordinated debt holders to the restructuring costs and that the bank will reduce its activities to offset the distortion of competition caused by the aid.

So, the commission are still unsure whether AIB is commercially viable or not – at the end of the day, then, will it turn out that the AIB is actually worth propping up. I’ll let you draw your own conclusions from that…

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News Flash: Assange Announces Bank of America to be WikiLeaks First Major Financial Target

Dark clouds settle over Bank of America

Remember a while ago when WikiLeaks stated that they had information on a certain American banking institution? Well, Assange has now confirmed that this is, in fact, Bank of America.

Assange also confirmed that WikiLeaks was holding a vast amount of material about Bank of America which it intends to release early next year.

“We don’t want the bank to suffer unless it’s called for,” Assange told The Times. “But if its management is operating in a responsive way there will be resignations,” he said, without giving details about the material.

Shares in Bank of America have fallen amid speculation that it was a WikiLeaks target.

Oh, I’d say that this is going to be pretty interesting, alright – so, stay tuned…

Photo by Dan Jurak

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Cryptome.org: Weighing in on the Debate on Freedom of Information

"Oh, I just looove freedom of information..."

Originally, I wasn’t going to weigh in on this debate – basically, because I thought it was stupid and boring. But now – due to certain circumstances that have arisen – I feel I must.

The other day I ran an article on Julian Assange’s underlying philosophy. One of the purposes of this article was – not to judge what Assange does – which I largely agree with – but to take a closer look at his motivations; which, I thought, were rather interesting. Assange has a definite – if rather abstract – political agenda. I laid that agenda out in the above article – together with describing a similar agenda in the work of French philosopher Gilles Deleuze – so I won’t go into it again.

Anyway, shortly after that article was published, visits to this site absolutely skyrocketed. I was sort of surprised, so I started poking around the stats to see why. Well, it would seem that in the article I had linked to a site called cryptome.org, which hosted Assange’s philosophical/political treatises. The people that run this site then presumably read my article and enjoyed it – because they linked back to me on their homepage. And that’s where the flood of readers came from.

Ordinarily, I’d have just shrugged my shoulders – happy that my article had not gone unappreciated. But being the curious mofo that I am – call it ‘journalistic instinct’; or, ‘nosiness’, if you prefer – I began looking into the site. And what an unusual site it is.

Apparently, it’s been around since the early days of the internet – it was set up by a New York based architect, John Young, back in 1996. It still shows these marks to this day, having not changed its ‘old skool’ html format.

Cryptome.org is essentially a leaks website – a sort of forerunner to WikiLeaks. “Fair enough,” I thought – but then, I looked into the site even further to try to discern what it was all about. That was when I began to realise that it wasn’t just a site like WikiLeaks.

Some of the stuff they leak/run is pretty important – for example, some time ago Microsoft attempted to sue them because they ran a Microsoft document dealing with how the company were going to assist in… well… I can’t put it politely: government spying.

Now, that’s pretty important – I, for one, certainly want to know if Microsoft are assisting governments in spying on me. But Cryptome doesn’t stop there. They also publish some very dodgy stuff. Here’s some passages from a Reader’s Digest article that was done about them back in 2005:

In the weeks before New York City hosted the Republican National Convention last August, security officials spent millions securing the area around Madison Square Garden against a possible terrorist attack. They set up barricades, installed extra cameras on buildings, and assigned extra police to the streets. John Young, a 69-year-old New Yorker, was also surveying the neighborhoods. He spent hours wandering around midtown Manhattan, snapping photos of unprotected local streets and other vulnerable areas near the convention site. He even snapped the location of a major pipeline that carries highly explosive natural gas into Manhattan.

Young was not working for the NYPD or the FBI. Nor was he part of a terrorist plot. A self-employed architect, he claims to be just a concerned citizen, someone who thinks we’re all safer if there are no government secrets.

So what did he do with all that sensitive information? He posted it on the popular website he runs, which typically gets 50,000 visitors in a day. Young featured dozens of maps and pictures, as well as observations about ways terrorists might attack the convention. Just trying to help, Young says.

Look, I’m the last person in the world to start banging on about freedom of information being dangerous in the age of terrorism – I know where that argument comes from and who it supports… I also know where it leads; but, that said, Cryptome still makes me uncomfortable.

I don’t need to know this stuff – I don’t need to know the ‘weak links’ in the Republican Party’s security. Indeed, who on earth would need to know this information – except some Travis Bickle-type who is intent on assassinating some political figure?

I’m not even talking about some scary Islamist militant (although, let’s not completely discount the possibility) – I’m talking about some wacko ala Lee Harvey Oswald (conspiracy theorists, please, don’t flood my comments section – thank you very much). I’m talking about the Timothy McVeighs of this world.

I guess the case could be made that the FBI et all could use Young’s ‘research’ to tighten up security – indeed, Young himself does make this argument – but its a little dubious. But let’s say we do accept this argument – how on earth can we justify this (also pulled from the Reader’s Digest article above):

Recently I surfed the Web and checked out Young’s site. Among other items, I found detailed maps showing how to reach a secret government bunker that’s reportedly one of Vice President Dick Cheney’s emergency hideouts. There were also photos of the front entrance.

Or consider what some of Cryptome’s sister sites are doing:

At another site are the home addresses and phone numbers of hundreds of officials around the country, from federal judges to mayors to attorneys general.

Cryptome provides similar information – listing the home addresses of CIA officials; including that of former director Porter Goss. Who the hell seeks out that sort of information?

This is all pretty far beyond WikiLeaks, of course – WikiLeaks have the wherewithal to vet the information they’re releasing, ensuring that this sort of stuff doesn’t make it to press. But we have to look at extremes in order to draw a clear line in the sand as to what is acceptable and what is unacceptable in the freedom of information debate. Cryptome – or at least, some of what it posts – is, in my opinion, unacceptable.

Why? Well, I think I’ve laid the case out fairly well – but I’ll add one or two last comments.

First of all, its sites like Cryptome that will – if the time ever comes – give certain power-players a mandate to shutdown net freedom. Sites like this will give them the ammunition they need in the debate over whether or not internet freedom should be absolute.

Secondly, the people who contribute to Cryptome clearly appreciate their privacy not being encroached upon – and I can appreciate that, really, I can. But have they not become so obsessed with this that, they themselves, have started to become the ‘bad guy’ – the person who spreads private information about people on the web? On that note I’ll leave you with a quote from the great German philosopher Friedrich Nietzsche:

He who fights with monsters might take care lest he thereby become a monster. And if you gaze for long into an abyss, the abyss gazes also into you.

UPDATE: Well, it looks like posting the addresses of certain public officials can end with some jail time for the eager freedom of information warrior: Blogger gets 33 months for threatening judges.

Turner had faced up to six years in prison. His trial was moved from Chicago to Brooklyn, where the case twice ended in mistrials after jurors deadlocked. In addition to his statements, Turner posted photographs, phone numbers, work addresses, and room numbers for the three judges.

Of course, Turner actually threatened the judges – but still, something to be learned, perhaps…

 

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Smell the Glove: Ireland’s Second Chance to Avoid Humiliation

David St. Hubbins: "You know, if we were serious and we said, ‘Yes, she should be forced to smell the glove,’ then you’d have a point, but it’s all a joke." Nigel Tufnel: "It is and it isn’t. She should be made to smell it, but..." David St. Hubbins: "But not, you know, over and over."

I presume that everyone has caught a whiff of the obscure legal foot-stomping by the ECB on the front of the Irish Times website today (just to point out, the meat of this article is lifted verbatim from a Financial Times article – the Irish Times cite this at the bottom of the article, but we should be clear that the opinion being put forward in this article is actually that of the Financial Times and not of anyone at the Irish Times; I wonder why the Irish Times didn’t even bother rewriting this important article…).

So, what does it all mean? Well, usually I steer clear of this finance rubbish unless it could affect the actual economy – but this micro legal-crisis could, indeed, if played right by the Irish government, affect the actual economy.

Basically what’s happened is that the ECB have come to realise that the draft legislation – called the ‘Credit Institutions (Stabalisation) Act 2010′ – which was supposed to remain effective until the end of 2012, is a bit dodgy – legally speaking. The ECB – which apparently must have thrown the bill together in a hurry – don’t like some of the terms therein; from what I can gather, their main objection seems to be that they’ve given too much power to the Irish Finance Minister (God help us!).

Indeed, if you read through the seven page statement that the ECB released – undersigned by Trichet – you’ll see numerous passages wherein the ECB voice their concerns that they may have given the Irish too much power vis-a-vis the central bank (in this case, the ECB themselves). For example:

Section 61 of the draft law details the effect of the various orders that the Minister [that is, the Irish Minister for Finance] may make under the draft law on certain other obligations. This should not impair the ability of the Central Bank or the ECB to maintain the Eurosystem’s operations and, in particular, to enforce their rights including, without limitation, the enforcement of security over any eligible collateral posted by any relevant institution, any of its subsidiaries, its holding company or any subsidiaries of its holding company.

But there’s something else underlying this. The Financial Times – that’s the Financial Times; not the Irish Times, although they ran the following passage too – interprets it as such:

The ECB’s concern is to ensure it holds enough collateral of sufficient quality to minimise its exposure were some of the funds it provides not paid back. The paper is the latest manifestation of the ECB’s worries about the risks it is carrying as it battles the eurozone’s mounting debt crisis.

And so, the grim specter of bank-solvency rears its ugly head once more! You see, Europe has been treating the present crisis as a liquidity crisis – so, they claim that if you throw loads of cash at the problem it will simply dissolve in the warm stream of liquidity that results… but this isn’t a liquidity crisis at all. As stated here before, this crisis is really a solvency crisis. Of course, everyone intuitively knows this – the banks are sunk and the only reason they continue to function is because we ignore this fact.

Why do we ignore this – or, more to the point: why do the Europeans let us away with ignoring this? Personally, I think the three main reasons for this are (1) to do with confidence in the Euro/Eurozone; (2) due to certain European bank’s exposure to Irish loans and (3) because the current Eurocrats are a cowardly bunch who are too scared of stepping on toes should they choose to actually sort out the fundamentals of this crisis. As I’ve said before, it’s a case of procrastination.

Anyway – let’s tie this up and get back to what’s important – the legal errors which the ECB has found in its draft proposal essentially open the possibility that the Irish might use this slip to their advantage and restructure the entire Irish bailout.

Yves Smith over at Naked Capitalism, points out how this error is similar to what happened at Bear Sterns back in 2008. There too the over-hasty drafting of terms and conditions led to renegotiations  – renegotiations that Bear Sterns, being wily Wall-Street cats, used to their full advantage.

Alas! the Irish government are rather less wily and rather more – how shall I put this tactfully? – servile and masochistic. So, chances are that even if renegotiations take place they won’t play this to their advantage… instead they’ll once again – how shall I put this tactfully? – bend over. Of course, the international community probably know this – why? Well, because we’ve become the political laughing-stock of the global finance community, of course. Smith puts it such:

[E]ven if this mistake leads to a renegotiation, it is not clear the Irish officialdom has the intestinal fortitude to exploit the opportunity as fully as they might.

But then who knows? Perhaps aggressive renegotiations on the part of the Irish government might lead to a better deal for the Irish people… hahahaha! just kidding… you should have seen the look on your face! Smell the glove, baby!

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