“Waiting for Godot”, or “Endgame”?

No formal announcement yet, but some presumably well-sourced rumours about the size of the Irish bailout (EUR 85Bn), and the rate (7%, via the redoubtable Twitterer on all matters Irish @LorcanRK).

While we await the budget statement, there are reasons to suspect, or hope, that the bailout, like Godot, will never come, because it’s failing already.

From a Eurozone perspective, it’s not warded off the dreaded “contagion”. Yesterday, Irish and Portuguese 10-year yields went up again. Mohammed El-Erian’s invocation of a bank run in Ireland (see the Guardian link above) won’t have helped much; nor will today’s Portuguese General Strike. Even more worryingly, Spanish 10-year yields approached their May crisis highs, and their spreads against German bonds hit new highs. So much for the policy justification. There just might be an underlying credibility issue; never mind AIB and Anglo, now to be nationalised, what of the other 80+ banks that also “passed” the European “stress tests”?

From an economic perspective, the bailout is another manifestation of the liquidity/solvency confusion that we saw again and again during the 2007-9 crisis. See Krugman for a quick reminder of why this goes nowhere. What on earth is the point of completely surrendering control of Irish economic policy to Eurocrats, and clobbering the country with another round of spending cuts, if “nowhere” is the destination anyway?

But even ignoring the solvency/liquidity question, or the supposed anti-contagion rationale, the bailout just doesn’t appear to be up to the job. In a previous post, I alluded to the curious mechanism by which the full horror of these debt situations is only slowly acknowledged. Oddly, the people furthest ahead of the game were actually the Irish authorities. Back in Q1 2009, they knew it could turn out like this, with ever-increasing figures for the size of the losses (WSJ):

On March 6, 2009, Mr. Lenihan met with advisers to bat around remedies. None sounded promising. He turned to Peter Bacon, an economist he’d hired a week earlier, who shocked the crowded room with a figure far bigger than the few billion Ireland had spent. The banks made more than €150 billion of potentially toxic property and land loans, he said. “That’s the extent of your problem.”

Mr. Bacon suggested the government buy loans from the banks at discounted prices, effectively handing them cash and easing doubts about their viability. By insisting on steep discounts, Ireland would be less likely to lose money on the purchases. On the flip side, bargain prices would trigger losses at the banks—which the government would probably have to patch with more capital. The taxpayer would foot the bill either way, but at least Ireland would understand how big it was.

The approach “has the merit of certainty and clarity,” Mr. Bacon argued. But, he added, it would only work if “the projection of the extent of impairment is accurate in the first place.”


Evidently, after the revenue hit of a recession and contractionary economic policy, the deficit problem’s grown even bigger in the intervening two years. So how big does the bailout need to be, if you think a bailout will help? There are at last some competing estimates.

Namawinelake, who’s been following the toxic loan mess for a long time, very carefully, takes up Brian Lenihan’s abject shoulder-shrug of a challenge and produces the horror estimate of around EUR200Bn-EUR250Bn. His commenters disagree about how to count it, but that’s the ballpark. @LorcanRK’s best estimate is that the EUR85Bn actually pencilled in would last about a year. Then the Irish would would be back to the current scenario – broke – with another year of austerity behind them. How much sense does that make?

But that’s not the end of it either. Last night, an even more horrific estimate – EUR340Bn – was broadcast on the perfectly respectable, widely viewed Irish current events programme, Vincent Browne. You can get a sense of the stunned reaction to it here.

Interesting timing. Sounds as if there might be a bit of politics going on over there. Encourage a couple more coalition TDs ( members of parliament) to defect, take the Government down before the budget is signed off, reject the bailout, that sort of thing?

Maybe; that would get seriously messy. But (h/t @Steve_Randy_Waldman, had no idea he read the Speccie, but he is a surprising fellow) , if Iceland is any kind of example (which is a stretch, if I’m honest), turning down the bailout might make sense to the Irish and their parliament. All it takes is a TD with some resolve, or some vocal constituents, and we are off in a whole new direction; a sharp lesson in democratic pushback; overdue worldwide, IMO.

That would be some end game.

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  1. Frank Ashe

    A tough line, but it gets through the problem with just as much turmoil as currently.

    The banks lied to the Irish government before their debts were guaranteed by the government. So the Irish government backs out of its guarantees on debts. Ireland talks tough to Germany and UK – “Your banks are now insolvent, lets all Euro countries who need to nationalise their own banks, scrub books clean in banks of interbank loans and Euro government loans, protect our retail depositors and rebuild banking system with better regulators. (Don’t need much more regulation, just using old regulations better.)

    Couldn’t be much worse than trying to dismantle the Euro, or the current practice of extend and forget with Irish bank debt.

    1. DownSouth

      Frank Ashe said: “The banks lied to the Irish government before their debts were guaranteed by the government.”

      Nothing new here. This is just neoliberalism—-the strategy and tactics of the international criminal banking cartel—-in action. Nothing more. Nothing less.

      The question is whether the Irish people are going to just bend over and take it up the ass or not. Certainly if Ireland’s PM Brian Cowen and his neoliberal guru, Brian Lenihan, get their way the Irish people are toast.

      The exact same thing that Cowen and Lenihan want to do to the Irish was done to the Argentine people, as Miguel Teubel explains here:

      Private foreign debt was eventually transferred to government, that is, was wholly ‘nationalized’. During the Alfonsín administration, the whole scheme was legitimized when a new stabilization program was signed with the IMF with no critiques concerning the legitimacy and legality of this enormous increase in foreign debt and its transference to government during the military dictatorship was made. ‘The Plan Austral [of the Alfonsín administration], fully supported by the bankers, had as one of its implicit conditions that the foreign debt would not be investigated or questioned, which originated a famous debate in Congress’ (Cafiero and Llorens, 2002: 97, author’s translation). The Alfonsín government did not heed to numerous critiques made at the time concerning this foreign debt, nor did it question its legality, something that at the time was being contested in the judiciary.

      1. Francois T

        “The question is whether the Irish people are going to just bend over and take it up the ass or not.”

        One would be remiss not to warn the Irish people that this painful treatment won’t allow for any Vaseline, Surgilube, Astroglide or any other substrate which coefficient of friction is low enough to avoid extreme irritation of the nerve endings afferent to this particular area of their anatomy mentioned in the above quote.

        Never know; such warning may help some of them to rethink this whole affair anew.


    1. Richard Smith

      Ah, if you’re not signed into Twitter, you will need to press the search button again once the Twitter page is up.

      1. johnhhaskell

        ok, I signed in to Twitter and it still isn’t coming up. What do I put into the search tab, “stunned audience reaction here”?

  2. attempter

    Ireland has long been the poster abused child for how “austerity” doesn’t work by any of the fraudulent metrics given in defense of it. They’ve already done everything the globalist criminals ordered, and none of it worked, it’s all been proven to be a lie, and here they are back demanding more.

    Will anyone ever really learn the lesson of Munich?

    So now we must again cite the most common definition of insanity.

    Not regarding the austerians themselves, of course. They’re simply criminal looters. They’re the ones benefitting.

    I’m referring to the people themselves, who keep complying with the same thing which already didn’t work and they already know is a lie.

    Is anybody ever going to take the plunge and simply smash their banks? Why would anyone still want to be part of financialized globalization by now? Isn’t that the only reason to tremble and submit – the same old pusillanimous fear for the state of one’s credit score? But none of that would matter if you could endure a short period of autarchy. You could restitute the land for food production immediately, so at least no one would starve while you figured everything else out.

    (But a big part of the problem is the treacherous leadership of allegedly public interest, “left” organizations and unions.

    For example regarding the Portuguese general strike:


    Here, just as in France, criminals among the leadership are trying to misdirect the public rage and will to fight, to render it impotent. That’s the mission of the “liberals” and “unionists”, and in Europe the “Socialist” parties.

    Thus we see how even the General Strike strategy has been circumscribed – even those who want to do it have been accultured to think of it in terms of a “one day” protest, really just a kind of temper tantrum, rather than a terminal stranglehold you clamp onto the criminal system to deny it oxygen until it expires.

    But then in Europe they at least still have the idea of a general strike…)

    1. Maju

      “… criminals among the leadership are trying to misdirect the public rage and will to fight, to render it impotent”.

      Yes, that is a big problem. It is backfiring and should get some things changed in the mid-run. But we do not enjoy the luxury of time: we need to put those politicians and banksters straight right now!

      “But then in Europe they at least still have the idea of a general strike…”


      It’s something indeed.

      1. attempter

        I’m glad to hear it’s backfiring. More and more people are coming to realize this. (It’s the same dynamic as with the Democratic party and most if not all of the existing NGOs in America.)

        But it still seems to be difficult to turn realization into inertia from disgruntled passivity to withdrawal of support to actively forming new strategies and organization.

    2. leroguetradeur

      “Is anybody ever going to take the plunge and simply smash their banks?”

      No, doubt it. And if they did it would not help. They have too much sense and too little despair to embark on these crazy Trotskyite projects, . Quite right too. There is a lot that needs doing, the same kind of reforms that were done in the thirties of the last century, but this is just rage and stupidity and no way to anywhere you want to go.

      1. attempter

        LOL. I won’t bother asking what’s “Trotskyite” about it, since I know that’s just a brainless epithet which isn’t meant to have any substance, and I’m sure you have no idea what it even means.

        I do think it’s funny whenever a corporate welfare statist like you accuses others of anything irrational or extreme, since nothing could be more deranged, extreme, and evil than your hideous “order”.

        1. leroguetradeur

          It is Trotskyite in the sense that it advocates a mass mobilization with specific institutional targets before the base has been prepared by raising the consciousness of the working class. In that respect it is opportunistic and the antithesis of proper revolutionary Leninism which has its own difficulties but is at least a serious prescription for bringing about violent revolution.

          The question to answer is: you smash the banks. And then what do you do?

          1. attempter

            Excellent cant. Where’d you read it?

            you smash the banks. And then what do you do?

            Enjoy self-determined work and life. Enjoy freedom and cooperative prosperity.

        2. leroguetradeur

          atttempter, when you have this shining new life, will there be any banks in it? Are you arguing for no banks at all, or are you arguing for different banks?

          If there are no banks, how would anyone ever get a loan to buy anything? Or would it be an all cash economy? Who would issue the currency? Or would it be barter and gold and silver?

          One is interested in hearing how LA or Chicago would function under this regime, or would they be smashed also?

          Also, what exactly is intended by the expression smash the banks? What would the people actually do? Do you mean the buildings? The vaults? The computers?

          1. attempter

            Why would we need big banks? If a large government still exists, it can issue money and make loans directly. If we have relocalized economies, the whole framework would exist at that level.

            Why should food production require much credit anyway? If the land is restituted to the producer, and post-oil much of the machinery (and therefore the capital required for it) will be obsolete, then what does the farmer need which the local or regional cooperative economy can’t handle?

            Of course the food distribution would be mostly local as well.

            Smashing the banks means most of all eradicating their economic and therefore political power. The three things which come to mind immediately are:

            1. Strip them of their money-creation power.

            2. Outlaw all speculation and usury. That mostly means declaring all such “contracts” void and unenforceable.

            3. Jubilate all bank debts and restitute the bank-stolen land.

            I’m sorry, I haven’t thought much about what to do with the Wall Street buildings. Are they suitable for conversion to affordable housing? Maybe the honcho offices are big enough to be apartments, while the cubicle floors would make good common areas. Maybe kitchen and bathroom facilities wouldn’t be sufficient, and would need to be expanded.

          2. leroguetradeur

            It seems, attempter, to be a vision of the US as it was in about 1900, is that right? Small banks, small towns, local agriculture supplying most food, small manufactures. Probably with horse drawn machinery in farms, maybe steam power for small factories? Usury is a difficult concept, not sure if you are saying that all lending has to be at zero interest rates? That would pretty much cut it out. Wall St, so stock markets, bonds all that stuff would go. Don’t know about the military, would we still have that? Don’t really see quite how Los Angeles would work in this environment, but maybe everyone moves out?

            Don’t really see how we stop it evolving right back to today with big banks and stock markets. We could abolish interstate banking again, and ban bank holding companies, but that would only be a few percent of the way to what you want.

            I don’t think its really practical you know. I can’t see people going for it. At the very least you would have to do an incredible amount of work raising the consciousness of everyone. Or you’d have to have some kind of coup like the Bolsheviks did, but that has its own problems in terms of achieving the ultimate goal.

            As one tries to imagine concretely where it is you want to go and how you want to get there, well. Its really hard to see its any more possible than to improve the system we have by hard grass roots democratic work.

          3. attempter

            I’m sure we’ll all miss global financialization, the weapons rackets, and Los Angeles very much, but I’m afraid the end of cheap oil is going to insist.

            So relocalization has to happen whether anybody wants it or not, and whether anybody organizes for it or not.

      2. DownSouth

        leroguetradeur said: “They have too much sense and too little despair to embark on these crazy Trotskyite projects…”

        What never ceases to amaze is that these same old lies, these same old platitudes cooked up by Mark Hanna over 100 years ago, are still being used. And they still work!

        As Lawrence Goodwyn points out in The Populist Moment, the planks of William Jennings Bryan’s platform in the 1896 presidential election were cast as “Bryanisms” and the public was assured that collectively they added up to “anarchy.” And as Goodwyn goes on to explain, the fact this mass propaganda campaign proved so effective has devastated American democracy:

        A new style of democratic politics had become institutionalized, and its cultural boundaries were so adequately fortified that the new forms gradually described the Democratic Party of the opposition as well as the Republican Party of power. A critical cultural battle had been lost by those who cherished the democratic ethos. The departure of a culturally sanctioned tradition of serious democratic reform thought created self-negating options: reformers could ignore the need for cultural credentials, insist on serious analysis, and accept their political irrelevance as “socialists”; or they could forsake the pursuit of serious structural reform, and acquire mainstream credentials as “progressives” and “liberals.” In either case, they could not hope to achieve what Populists had dared to pursue—-cultural acceptance of a democratic politics open to serious structural evolution of the society. The demonstrated effectiveness of the new political methods of mass advertising meant, in effect, that the cultural values of the corporate state were politically unassailable in twentieth-century America.

        1. leroguetradeur

          It seems to me that the balance of powers achieved by Glass Steagal and the Securities Act worked rather well for around 50+ years. What has worked better, historically? You need banks of course, smash them and you will have to recreate them. What does smashing them mean, anyway? But you need balance of powers, Federal versus special interests. That is what Glass Steagal did, and the old trust busting Federal establishment. The dynamics are well described by Mancur Olson.

          1. Cedric Regula

            Don’t forget FDIC insurance was also a key pillar in 1930s financial reform. We don’t want to hit our own thumb when smashing a bank.

            Course you wouldn’t want your pension, insurance company, or 401K invested in something like a S&P500 ETF either.

            This is all part of what makes letting banks fail so expensive.

            A basic finance and econ tenet is that in a macro sense, you cannot make risk go away, you can only push it around, or spread over more people. The magnitude stays the same. So you want to reduce systematic risk. Too bad everyone forgot that.

          2. attempter

            Ah, here’s his moderate, “reasonable” bona fides. He’s not some crazy Trotskyite. He wants Glass-Steagal back.

            Of course we already know what happens when you have Glass-Steagal – you lose it.

            So if you’re telling the truth, then you want to fight an endless war of attrition for the rest of eternity, winning and losing Glass-Steagal.

            And all for one reason and one reason only: Because you want banksters to continue to exist and continue extracting obscene rents for producing zero value but destroying incalculable amounts of it.

            Yes, very moderate. Very reasonable. Not crazy at all.

          3. DownSouth


            You may not be a shill for the banksters, but you certainly have the drill used by these right-wing-trolls down pat.

            First you try to paint the enemy with the face of evil, branding him a “Trotskyite.” When this backfires, then you fall back to the second line of defense, which is to try to make yourself appear reasonable, and your enemy unreasonable. Of course you’re not reasonable at all. Nothing could be farther from the truth, a fact made manifest by your attempt to demonize your enemy, calling him a “Trotskyite.”

            The truth is that your entire little song and dance is orchestrated to limit the scope of the debate, to narrow the area of contest from the center-right to the far right.

            Amitai Etzioni explains how it works in The New Golden Rule:

            Liberal individualists stress the importance of keeping ultimate values out of deliberations (to keep them “thin” and limited to public matters) to ensure that people will enter them with an open mind. When this valid observation is pushed too far, it leads liberals to join dialogues without strong commitments—-only to be reasonable, constructive, and to find a compromise. When they face others who have strong substantive convictions, the result is illustrated by the kind of dialogues President Clinton engaged during the first two years of his administration. He gave up half of his agenda before the give-and-take started, and was quick to fold much of the rest—-all to be reasonable. To call attention to the difference between joining a dialogue with strong positions along with the willingness to listen and respond to others, versus joining it mainly out of a commitment to a good process, I will refer to a “dialogue of conviction” versus a “dialogue of proceduralists.” For moral dialogues to take hold, to gain traction so to speak, they must be those of convictions, not of proceduralists.

            So what you are striving for is a double standard. You are allowed a dialogue of convictions. Your opponent, however, is limited to a dialogue of proceduralists. Or in other words, you can fight with both hands and he must fight with one hand tied behind his back.

          4. leroguetradeur

            When I describe him as Trotskyite, its a very specific sense, it is like describing someone as a Jansenist or Manichean when asserting heresy. Trotsky was over deeply impressed with the events of 1905 and therefore believed in mass demonstrations, national strikes, stuff like that. The Troskyite position has always urged mass action before the ideogical base has been prepared, and its always failed in consequence.

            I don’t believe violent revolution is any sort of solution to our present problems, being impossible of achievement and no solution even if achievable. I believe the correct way out of our difficulties is patient grass roots work within an existing democratic system. The problem is not that the levers are not there, the problem is that too few people are grabbing them and contributing.

            However, to call attempter’s approach Trotskyite is not simply name calling, it is diagnosis. It really is that, and it is impractical because of difficulties in the way of making a go of that approach generally. I would repeat, the Leninist line of preparing the ideological base until the moment of action presents, I don’t have any sympathy with Bolshevism or its consequences, but it is at least a practical method of achieving something. The Trotskyite mass insurrection, like the events of 1905, is not.

          5. attempter

            You seem to have paid no attention to anything I’ve said, nor do you understand 1905 or Trotsky’s role in it at all.

            In fact, Trotsky embraced and participated fully in the soviets, but then dissuaded the Petrograd soviet from armed insurrection. Lenin, meanwhile, at first scoffed at the soviets, but then belatedly pretended to embrace them, and helped rile up the Moscow activists for their disastrous December insurrectionary attempt. So you have their roles exactly backwards.

            Ironically, if you had gotten Trotsky’s actions right, you could correctly have said, not that I’m a “Trotskyite”, whatever that means, but that I concur with his perceptions and role in 1905, which of course has nothing to do with “mass insurrection”, but everything to do with political decentralization and direct democracy.

        2. leroguetradeur

          Of course you have to keep on top of Glass Steagall or any kind of regulation. Its like civil liberties, its continually under threat. This does not mean its not worth having or is not a solution. When its in place, it works, and it stays in place for long periods. Then people forget, try to undermine it out of perceived self interest, and you have to struggle to get it back again, or stop it being lost in the first place.

          All of which is democratic practical nitty gritty politics and has a value which you cannot cast doubt on by these wild ravings about mass action and smashing the banks.

          1. attempter

            There is nothing whatsoever “practical” about continued belief in representative pseudo-democracy. It’s an empirically proven failure on a practical level, and has been a conscious, systematic scam on the part of neoliberal elites since at least the 70s.

            So you’re not practical, but merely an adherent of crackpot pragmatism.

      3. Richard Kline

        So larogue, where reform isn’t possible, revolution or devolution become the options: choose. Revolutions which take power succeed in their broad aims even where they often fail in their putative ones. The French Revolution definitively broke the power of the aristocracy for example, though of course it did not generate an egalitarian utopia. Whether reform is possible in Europe is something I see undetermined. It is quite clear that reform is not presently possible in the US because our one-party system is owned by the criminals. General strikes are only useful against specific, achievable objectives, and they require significant organizing capacity to sustain, a condition wholly lacking in the US. Today’s ‘Scannergate’ fizzle shows us what the flash mob set has as far as substance: grains of sand without clay. The bosses like it that way.

        So, here we are back at choices: revolution or devolution. Sure, there’s a lot of fuming now that’s unproductive. Most of the citizenry, this side and that side of the water, are shocked to witness the gross supineness of our political classes; we’ve had the illusion that we were at least well-governed, only to find out that we were merely lucky and, transiently, rich. ‘Lots of reforms as in the thirties’: Brother, the problem is not that reforms aren’t known, it’s that their not _possible_. That is the lightbulb that doesn’t shine where you live, it would appear. We’ve had excellent historical examples, the Swedish Solution for one, and quality ideas bruited about for three years and more: the political classes won’t touch any of them because the rich don’t need them to stay rich and in power since the government simply pays them at the expense of the rest. That’s a revolutionary configuration, but no, as you allude, ‘the masses aren’t prepared yet.’ And maybe never, and that would be in many ways a good thing. The downside of revolutions is that they kill a lot of innocent bystanders; seriously messy, hard to root for. The rich just aren’t going to get it done, this time, this place.

        On the Irish Bog: $340b in zombie debt, 3.4 million in citizenry, just do the math. End the ‘lendgame,’ and fail the banks. It is that simple. So is belling the cat . . . .

        1. attempter

          Just one correction:

          The downside of revolutions is that they kill a lot of innocent bystanders; seriously messy, hard to root for.

          As opposed to the far greater number of innocent bystanders who are killed by the corporate system, as we’ve seen from Pinochet to Iraq, just to give a few of the more recent examples.

          For that matter, the vast majority of the violence of any revolution is caused not by the revolution itself but by the criminals trying to hold onto power.

          If some people are assaulted by marauders and fight back, and one of them is killed while defending himself, or if indeed an innocent bystander is killed, it’s not the act of self-defense which killed them. It was the attackers who did.

          I’m reminded of those who demand to know, “how would we pay for Single Payer?”

          But Single Payer is far less expensive than the status quo. Single Payer wouldn’t cost money, it would save money. A huge amount of it.

          Similarly, a successful revolution doesn’t cost lives. It saves them.

          1. leroguetradeur

            What was the toll in the Soviet Union by the time they got through? 20 million? 40 million? All those people trying to hang on to power, what, in the fifties? That was still the heyday of the gulag?

            What about China, 100 million? 200? That was, lets see, 30 or 40 years after the revolution, and all those people were still hanging on to power?

            Get real.

        2. leroguetradeur

          I do agree that if its 350 billion, its time to call it quits and stop trying to save a few billion here or there. Its game over.

          What I don’t agree with is that the Irish people are the victims, they got themselves into this mess. And I do not believe that that way out is going to be any less painful than what they are doing now. When and if Ireland repudiates all its debts, leaves the Euro and goes back to the punt, it will be a tiny poor agricultural country on the edge of Europe that no-one will lend to for a generation. With a population that cannot wait to get out. It will not be any fun at all. Will it be any better than the present course? Dunno. Its probably about the same, different, but no better.

  3. vlade

    As hard as I try, the only feasible end-game scenario for Ireland is EUR exit.
    The reason is simple – they needs tons of money they can’t ever repay. Defaulting in EUR will not help, because it will make zilch difference to their internal prices. See Baltics, and I doubt Ireland would be able to do this as it has a long history of emigration. When 10-20% of your people (and most likely the young/skilled ones) emigrate, how do you make the country grow?

    They need to get out of EUR and depreciate severely to be able to compete again. Greece, at least in theory, can grow due to having space for reforms/corruption removal etc., but where’s Ireland’s growth going to come from in the current world?

    Then EU has the separate problem of what to do with the
    UK/German banks that are in hock to Irish – and of course, how to deal with the EUR exit.

    1. leroguetradeur

      Yes, this must be true, given the size of the thing. No amount of austerity is going to allow them to repay those loans. No amount of dash for growth is going to do it either. Its like a guy making 20k with a mortgage of a million and payments to match, it cannot be done. In the end its repudiation, whether inside or outside the euro, and the consequences either way will be dire.

  4. Maju

    “take the Government down before the budget is signed off”

    That is exactly what is happening right now and what can save Ireland in fact.

    Better a bankruptcy and leaving the euro now than taking on infinite loans that you’ll never be able to repay. Snowballing the problem is no solution: let the banks eat their risks (who takes risks should be able to assume this kind of thing, right?)

    In any case we cannot sacrifice whole nations/peoples or even Europe as project to the Moloch of banksters’ greedy incontinence. At some point nations must put a stop to that abuse and let the center of the financial stage take the losses.

    Ireland is already walking in that direction in spite of Cowen and his gang of traitors. There will be no bail out, at least not before elections.

    I’m more worried about Spain right now. In your links’ post of today there was an article explaining it’s too big for a bailout, what is probably true. But what really worries me is that, unlike in Greece or Ireland, resistance to EU policies is weak and essentially extra-parliamentary (anarchosindicalists and anti-Spain peripheral nationalist movements). Spain, with few exceptions, is a moral desert: a paradise for neoliberals, so there will be little resistence, except for the growing extreme left and peripheral nationalists, which are clearly benefiting from the passivity of the institutional left.

    Not like a revolutionary scenario is to be expected in the short run (moral desert: a lot to work in that side) but a Yugoslavia-like disintegration scenario is not impossible at all. In fact, I’d say it’s quite likely past some point. However, unlike in Yugoslavia, it’ll be (it is already) leftist forces the ones pushing for disintegration of the inviable state.

    What really has me worried is that I know well how the Yugoslavian wars were and they are anything but pretty. The likelihood of ethnic cleansing is less likely here (as we have Latin concepts of ethnicity: ius solis) but I cross my fingers anyhow.

    1. Jim Haygood

      ‘A Yugoslavia-like disintegration scenario is not impossible at all.’

      Ay caramba! Sounds like 1936 all over again! Need some volunteers to fight the bankster Falangists?

      Are you seriously suggesting that the Basques and Catalans go their own way, Marbella declares itself a city-state along the lines of Monaco, while Madrid becomes a kind of Spanish Belgrade governing the rump state of Castilla?

      Cr-r-r-r-r-r-r-rikey! [Roll your r’s when you say it!] If that’s so, we’s in worse trouble than I thought!

    2. Richard Kline

      It is surely true that at present the authorities have devoted all their capital to saving the banks rather than saving the countries or the people. This will of course, since the banks are not, in fact, salvageble. If those in power keep this up, time will come they won’t even be able to save themselves. But where is the rational for blowing apart countries as opposed to current governments? That is like burning down ones house to spite the lender; not thinking with ones head.

      And Catalunya is going to leave Hispania anyway. Within the EU, it’s a matter ot time on the order of 1-2 generations. Most of the other intractable statist marriages under duress in Europe will go that way, it’s one of the hidden advantages of Union. Painfully artificial state boundaries can be *cough* moved. Especially since the armies necessary to achieve and sustain them have been stood down. Leaving the Union has no point: using its potential powers rather than the rotten boroughs of past national states is a better choice.

  5. jake chase

    All this just shows that the cornerstone of globalization is monetary soverignty. Countries lacking a reserve currency are dead meat, if not sooner then later. Of course we can expect the Fed to hold up the Euro to protect US exporters. Globalization is the world of Alice in Wonderland. Up is down and down is up, but every national population gets relentlessly screwed while corporate elites plunder the banks. These endless parsings of Europroblems are nicely done, but you shouldn’t need a weatherman to know which way the wind blows.

  6. Jim Haygood

    Seven percent? Faith and begorrah, me muckers — what is that, some kinda penalty rate?

    With Irish consumer prices hovering on the border of deflation, this is a crushing real rate of interest.

    ‘Bailout’ my foot — more like a prolonged Bataan death march to oblivion.

    Nothing has changed — Europe can restructure now, or restructure later.

    Let’s crash!

    1. Captain Teeb

      I don’t quite understand where the 7% comes from. Today’s Eurointelligence.com reports that Ireland is currently paying 6%. See


      (It’s in a table at the bottom of the page.)

      In any case I’m naturalized Irish and fully agree with everything said here, except that the Irish may not riot. The only city is Dublin, all the rest is towns and villages, less convenient for demonstrations than, say, France or Spain. People are spread out in suburbs (as in North America), which don’t lend themselves to political assembly.

      Unlike America (or France, for that matter), the Irish are more likely to pick up and leave (especially, as one commenter pointed out, the young and skilled), much as they’ve always done.

      As for throwing out the politicians, the two parties are even more alike than the US Dems and Repubs, both dating from the Civil War and both thoroughly corrupt. A lot of people have a lifelong habit of supporting one or the other, though that could change if patronage shrinks.

      I hope that the Irish can show Europe what a backbone looks like and throw off the shackles of hopeless debt. The way the Irish vote on the Lisbon treaty was regarded by the European elite (not one of who dared to hold a referendum in their own country) should serve as a lesson.

      1. Richard Smith

        Yes, 7% sounds pretty stupid.

        Just a rumour so far. Will be keeping an eye out for something more definite.

      2. Richard Smith

        BTW that EuroIntelligence number for the Irish 10-year is *wrong* if it is a yield, not a spread over Bunds. The spread *is* around 6%, or a bit more, with the Bund at 2.2% or so.

        The Irish 10 year opened at 8.45, now 8.89. Market not convinced.

  7. DownSouth

    Richard Smith,

    The sewing of the “liquidity/solvency confusion” is intentional and it is deliberate.

    That’s all Milton Friedman and Anna Schwartz’ A Monetary History of the United States, 1867-1960 was, a massive propaganda piece to make it seem like the Great Depression was precipitated by a banking liquidity crisis and not a banking solvency crisis.

    Much to her credit, Schwartz seems to have had an epiphany and identifies the current crisis in the U.S. for what it is—-a banking solvency crisis.

    The “liquidity” charade is necessary to dupe taxpayers into believing that the massive “liquidity” infusions being interjected into banks are “loans” and not gifts. The stark reality is that the banks are insolvent. Nobody except government-subsidized central banks or other government-backed agencies (like the IMF) would loan money to these banks. And if a private party did loan them money, it would be on far more adverse terms than the near 0% interest loans collateralized with toxic waste that the government-backed entities make.

    But the situation appears so grave that all the king’s horses and all the king’s men may not be able to put Humpty together again.

    1. Richard Smith

      Agree. This Irish ‘bailout’ may be the denouement.

      Or – it gets patched up again, and we sit and wait for something else to blow up. The underlying insolvency isn’t going away.

    2. Jim Haygood

      From a New York Times article:

      “Have politicians got the courage to make those who earn money share in the risk as well? Or is dealing in government debt the only business in the world economy that involves no risk?” [German chancellor] Mrs. Merkel said, according to Reuters.


      Huh? We were all taught in finance class that sovereign debt IS the risk-free asset, as far as credit risk goes. The power to tax, the power to print, and all that.

      Surely Ms. Merkel meant to ask, “Is dealing in BANK debt the only business in the world economy that involves no risk?”

      If sovereign debt holders have to accept haircuts to keep owners of bank debentures whole, then the conventional credit hierarchy gets turned on its head. And it becomes clear that banksters rule …

  8. Siggy

    Insolvency is the issue, not just in Europe but here in the US as well. Where ever you have fractional reserve banking, and there is financial distress, the most probable condition will be insolvency.

    1. Paul Repstock

      Those are two sides of the same coin.
      If you take a nice full bucket and put a large enough drain in the bottom of it, the bucket will run dry no matter how often it is filled. When this is a communal/comunity bucket that people have been conditioned to drink from, the people can be counted on to bang the sides loudly when the level appears to diminish.

      We know a few things: 1)The bucket was designed with the hole in the bottom/(Lacking integrity). 2)The government/ (people) have been brainwashed to believe that if the bucket ever runs dry the World (as we know it)will end. 3) That there are specific groups and individuals who benifit both by the actions of filling the bucket and from the resultant stream from the leak. 4) If we continue on this course we (and our children and our children’s children)will die in slavery.

      What we don’t know: What will happen if we stop filling the bucket..

      I suspect very little. Almost everyone has been locked into this mindless struggle from a failure of imagination and a fear of the unknown. The link sombody put up yesterday to “Joe and the Volcano” was priceless. The faceless legions employed by government and financial institutions are as locked into this stupid cycle as much as anyone else.

      1. Paul Repstock

        Speaking of the failure of imagination: The ONE thing that is never mentioned in polite company, is plugging the leak!

        The “Bucket” is our civilization. The “Liquidity” is wealth (The cumulative sum of all the creativity, resources, and time). The “Leak/drain”, is the unending demand for this wealth from nonproductive activities.

        Over time these nonproductive activities have assumed a disproportionate importance in our society. They do not reflect our humanity because their funding is compulsory not volentary.

        We do not live in North Korea. Our people will not starve if there are no taxes!

        1. Paul Repstock

          The single legitimate function of government is to defend it’s citizens from force/extortion. The people with government’s encouragement have expanded this mandate to cover every vested interest contingency. To the point where we are now dependant/constrained, in every facet of our existence.

          1. Paul Repstock

            It was unfair to single out North Korea. They are the future ‘us’. Vilified and rejected as they might be, they are symbolic of every government’s wet dream. Total top down control with no option for change.

            In North Korea the “Bucket” is the ultimate Black hole. Only enough radiation escapes to deine that ‘something’ is there.

            The entire product of the people, plus whatever can be scammed or extorted externally, goes to maintain the leader and the bodyguard (army).

  9. Mickey Marzick in Akron, Ohio

    No matter how far we travel down this road of insolvency, followed by bailouts, accompanied by sellouts, we collide at the crossroads of the TRILEMMA – economic integration, national sovereignty, and representative democracy. And usually one of the latter two is and has been sacrificed to MOLOCH on the altar of commerce. Indeed, the “leadership” in these countries is willing to sacrifice both the nation and the semblance of democracy for the sake of globalization, tying us all to the same millstone of debt forever. Interdependence is merely sleight-of-hand for financial insurance – TBTF – in which OUR banking losses and speculation become YOUR, the taxpayers’, problem. Between the “looting” and then the “dumping”, national sovereignty and democracy don’t have a chance.

    “STARVING THE BEAST” has gone global! The endgame is nothing less than the destruction of the nation-state via public debt and its fragmentation into competing neofeudal principalities and duchies that much easier to plunder in a divide-and-conquer atomized territoriality spanning the globe. One in which debt cropping is the “new normal” for the vast majority of the technopeasantry working on the corporate manor.

    How far we travel down this TRILEMMA is our dilemma. How and when does this “game” end? Refusing to pay the debt, public and/or private, is the only general strike that will end this game. This the the contagion feared by the bankers…

    Repudiation is liberation.

  10. KnotRP

    What on earth is the point of completely surrendering control of Irish economic policy to Eurocrats, and clobbering the country with another round of spending cuts, if “nowhere” is the destination anyway?

    Each day of extra looting, is like another day of sunshine…for the bankers.

  11. Cedric Regula

    Has anyone figured out yet where all the bailout money comes from yet? Last I heard the Eurozone bailout fund of EUR60B wasn’t funded yet. Back when Greece said they needed EUR150B and a pony or two, the IMF was talking about increasing their warchest from $100B to $250B. If participating governments would be so kind and kick in the bucks.

    When I first heard of the PIIGS crisis I kind of assumed it would be a porker race to the trough, but the trough doesn’t seem big enough. I also thought bondholder haircuts would be standard procedure too. So I got everything wrong.

    I think the way Greece settled out was they got enough money to last about a year, then we get to do it again.

    Still, it looks like there is only enough money for a IG crisis. Then we still might PIS on the Eurozone FIRE.

    Even our acronym is in question now that we may need to add a B for Britain and another B for Belgium. Back to the scrabble board.

  12. shtove

    Peter Bacon is the guy brought in by the Irish government in the late ’90s to solve the problem of excessive house prices. Yes, Irish people were worried about it way back then!

    His solution: free up the planning laws to allow sufficient residential construction to supply the market. Now they have a California style overbuild, and the bankers still walk away with all their wealth.

    Just another shill.

    1. Cedric Regula

      Shouldn’t we take the opportunity to re-locate Israel to Ireland? It’s makes much more sense than where Britain decided to put them. Plus they come with real industry, may have some bankers that know what they are doing, and they get aid all the time, not just on special occasions.

      In fact, I thought that’s why we built all those houses in Florida, but if Ireland needs Israel more than the US, it’s ok with me if Ireland takes them.

  13. scraping_by

    Remember that a European country underwater and sinking is not a universal tragedy.

    There are the bondholders being paid with tax money diverted from real national needs, and indeed, the governments borrow money just to give it to them. Then there are the state assets sold at fire sale prices. Add the spread of the IMF/ECB/Koch brothers anti-government philosophy and there are indeed, winners and losers here and the loss of national control.

    There’s no confusion on who is who here.

    1. Liminal Hack

      “That would be some end game.”

      There is no end game. Look around – people are angry – especially where the austerity nonsense is being pushed but I see traffic still cruising, planes flying, and no blackened buldings pockmarked with shellfire (apart from in South Korea).

      Despite agression by a nuclear armed state and the financial and policitcal implosion of the next euro-patsy, markets are up over 1% today!

      The end game is what it always is – lets play again, you go first this time, tweak this or that rule.

      This crisis is rather unique in that the crisis such as it is is entirely a figment of collective human imagination.

      It seems to me the markets are starting to get wise to that and are moving accordingly. As are various groups of students and ordinary people round the world.

      There is only one possible response from the authorities to general popular outrage in this day and age of gridlocked politics and that is being served up by central banks as required.

      It is working already, and will continue to work. The eurozone is the last bastion of insitutionalised gold standard thinking left in the world (at least until ron paul gets taken off by the men in white coats) and once it has been discredited we can turn the board over and carry on. It won’t be as bad as peolpe think.

    2. Paul Repstock

      I ould differ a bit scraping_by.
      I won’t argue that this scheme has been engineered by those which we now call either; Banksters or The Elite. Sadly, the scheme could not have suceeded without the complicity of the Government (To relax lending and reserve requirements) and the gulability of the people who chose to ignore the numerous applicable laws of nature and physics.

      Some few across the entire social strata rejected the scheme and were either marginalized or vilified for it.

      The Banksters may have built the scafold and hired the hangman. But, we borrowed the money to buy the rope for our own hanging.

      1. Paul Repstock

        Perhaps we can blame Mr. Greenspan for it (certainly his clones have been well distributed around the globe).

        However, Mr. Greenspan did what he was told to do to the best of his ability. He was told to maintain stability by creating “The Goldilock’s Economy”. He tried to do that.

        The “Flaw” which he and the various governments still refuse to recognise is that static organisms cannot grow. When an organism ceases to grow, it begins to die. The final act of that progession is a form of canibalism, which I think is what we are witnessing now.

        1. Liminal Hack

          There is no biological need for an organism to ‘grow’.

          All it needs to do is respirate and reproduce such that its dead parts are replaced by an equivalent number of live ones.

  14. yoganmahew

    The 85bn is only not enough if the ECB does not play ball. Likewise the rate, which now appears to be 6%, is only too high if the banks have to get funding on that basis to replace redeemed bonds and flown deposits, again it comes back to the ECB.

    If the ECB remains discontent, unwilling, but fait accompli’ed with the current and future liquidity mountain it is funding (it is after all the lender of last resort), then the can is kicked further down the road and creeping recapitalisation from retained profits is possible.

    Given the 85 bn figure, it looks like about 30 bn will be injected as CoCos with a coupon of 8-12% and ordinary subordinate bonds with lower coupons. The existing preference shares in BoI and AIB will be converted to equity with additional funds from the NPRF for AIB and IL&P. The ECB will keep the current facilities active and continue to lend emergency money as required.

    A fast slimming of assets through sales with loss-sharing agreements will diminish the real capital requirements over the next couple of years and should see that repo requirement reduced. Existing shareholders and subordinate debt holders will be wiped. Parts or wholes of the existing banks will be sold to ‘stronger’ foreign players.

    This to me seems to be the current plan. How credible it is next to previous plans remains to be seen.

  15. Bernard

    to watch the Green Party member tell Vincent Browne he would sign and help enact the budget into law and then quit. pull the rug out from under the Government/coalition member/Other guys. Be a partner to a bad deal and then quit.
    won’t tell what the cost is of, cause it’s “secret” negotiations with the IMF/EU.

    to watch him sell out fellow Irish taxpayers and then leave the government.
    and profess ethics about “secret Negotiations.” lol

    wow they are almost as good as our own Congressional thieves.

  16. Hugh

    The atmospherics differ from region to region but the core conditions are the same worldwide: failed, kleptocratic elites and insolvent banking sectors. I know the US is never going to get out of its mess until the great wealth inequality created over the last 30 years has been reversed. That is to bring the system back into balance the rich will have to eat the debt of most of the rest of us, debt that we would not have had if these massive transfers of wealth had not occurred. Supposedly Europe has less wealth inequality. I wonder how true that really is. But I think the eventual resolution will have to be something similar. We all need a financial reset.

    As for how things are playing out in Europe it is looking more and more like their version of whack-a-mole. Perhaps endgame is the wrong word. Perhaps end stage would be more accurate.

  17. Francois T

    Question from a non-banker/economist/financier:

    Why can’t Ireland just default and tell bankers and colleagues to go to hell?

    1. attempter

      Because they’re brainwashed into their “consumerism” and therefore tremble over their “credit score”, in this case their international bond rating.

      They don’t have citizen consciousness.

      So as is they’re psychologically incapable of dumping the bank tyranny. They believe in its terrorist lies.

      My detractor above is actually right about the “consciousness of the working class” (if he’s sincere, then he’s a typical example), although he understands nothing of tipping points, and also doesn’t understand that if knowledge is currently insuffcient, then the answer isn’t to give up, but to try to provide that knowledge.

    2. leroguetradeur

      “Why can’t Ireland just default and tell bankers and colleagues to go to hell?”

      They probably will default, if the numbers turn out to be north of 200 billion euros as is currently being bruited about. But to see why this is not a solution you just have to think through what will happen next.

      You’ll then have a country unable to borrow and with basically no banks. The banks have made bad loans. These loans are going to default. When that happens, the banks will go bust. Going bust means that they have no reserves. That means your and my deposits have vanished. Because that (partly) is where the reserves come from. They will also default on all their own borrowings which is where they got a lot of the money they lent, so other institutions they borrowed from will take a hit, and some of them will go bust too.

      At this point you have to reissue the currency, recapitalize some banks – you really do have to have some banks in a modern economy. You have to make the currency exchangeable, so that means balanced budgets and fiscal austerity and rectitude for quite some time to come.

      It can be done, it probably will be done eventually. But the consequences of such a large default by financial institutions is very difficult to forsee. Which is why the euro bloc is so desperate to avoid it.

      However, they probably cannot. After the loss of the by-election its not clear that the government can get the legislation through. At that point default will probably happen.

      The difference between rationality and pure silliness on this is not whether you think this is likely. Its whether you think there is any good way out. There is not. Once you have this huge amount of bad debt, there is no good way out, and default is not a good way out. So do not cheer when they default, and do not think they are ‘sticking it to the banksters’. They are not, they are sinking into the mud all of them.

      Also remember, there were not many innocent victims in Ireland. There were some, and they will be hardest hit, but the whole economy and most of the voters were willing participants in the madness they are now paying for.

  18. Ringaroundthecollar

    A lot of intelligent thoughts written, but what I’m not reading, is the understanding that all of these problems originate because of one reason: Private ownership of Central Banks who issue our own money to us, and then charge interest to do it. Thank that traitor Woodrow Wilson; may he burn in hell.

    Now I am just a simple person and I can understand this. You people are like frigging economic eggheads, are you all so close to the “Lending Tree” that you can’t see there’s a forest which surrounds the lending tree? Hello? Chop that renegade bitch down! Now aside from some shills and trolls, the vast majority of you seem pretty intelligent. My question is why you intelligent people aren’t looking at the historical record for solutions and blending those sound ideas with established law, and using your own smarts to refine upon these things to help us all here in our country, as well as establishing something for everyone else on the planet to go off of?

    Now I am just sure that most of you, if not every last damn one of you, knows who Bill Still is and you probably even heard of E.C. Riegel before. Disregarding the lawful ability of States to mint coin, the people themselves, meaning people like all of you, have the ability to create our own medium of exchange. Never mind the authorities, are there going to be any, and who will they work for if the money has no value, wouldn’t they rather work for real value? No, you don’t start off right now like those guys with the Ron Paul freedom dollars. You just establish a plan which could be put in to effect when the government fails, because it sure seems like a dollar collapse would mean a disfunctional government. Maybe I’m too simple, eh?
    Maybe they will pay the police, fireman, ambulance drivers with gold from Fort Knox. Maybe govcorps NPPD can be responsible for maintaining order, ya know, like at the airports. Oh, you don’t know about NPPD? Sounds familar doesn’t it? Wake the hell up people, create our own money or else!

    Obviously, despite some uneducated views towards the value of Silver and Gold, any minted coin of these kinds will and can suffice for worthless fiat currency. Interestingly, the nay sayers don’t bother to inform the brainwashed of the many and growing uses of rare metal. Such as Gold having properties like casting off anti-matter in laser light, or Silvers use in emerging technologies. At any rate, such recognized currency will and can suffice until such time as people become educated enough to know that all money should issue from a bank of the people without debt. Just like Andrew Jackson and some other people understood, and, yes, it doesn’t even need any precious metal backing, just ours!

    Please, some comments and feedback would be appreciated because I just don’t get it. All the stupid hand wringing is only because you have all forgotten that silver and gold is, in fact, money. Oh, yes, some idiot will claim there isn’t enough. No, there is plenty, I just checked, and the only thing is that it isn’t going to get cheaper with a global currency collapse. At any rate, try giving a dollar bill over giving a silver coin to someone outside of the US or those fools in Europe and see which one they would rather have. Big surprise. Please, you people are the exact sort of people that need to work on ideas to provide alternative currency because we know that the days are counting down.

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