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Morgan Kelly tells it like it is AGAIN. Essential reading.

category international | anti-capitalism | other press author Sunday May 08, 2011 11:02author by V for vendetta Report this post to the editors

Morgan Kelly has done it again. He has cut through the Nonsense coming from our government and the media and got to the core of the matter. This article is the best summary of our current state of affairs in regard to the banking debt and our future that I have seen to date. I hope those idiots in Lenister house and the great sir Patrick Honahan are reading their sunday times today. Because its the only real sense I've seen on the matter lately, buried deep on the comments page as it was
here we go.......
here we go.......

Original Introduction:
Morgan Kelly has done it again. He has cut through the Nonsense coming from our government and the media and got to the core of the matter. This article is the best summary of our current state of affairs in regard to the banking debt and our future that I have seen to date. I hope those idiots in Lenister house and the great sir Patrick Honahan are reading their sunday times today. Because its the only real sense I've seen on the matter lately, buried deep on the comments page as it was. But they couldn't really refuse the article. And they couldn't hide it much more than this either. This article is a political bombshell. I hope everyone in the country reads it.

And I hope professor Morgan doesn't mind me quoting a decent bit of it here in the national interests. Thanks for taking the time Professor. I'm putting this up here so as many as possible of the Irish people will have an opportunity to become aware of and read your piece.

For obvious reasons you'll need to go to the irish times online site to read the rest. Its up there free to read for now. Link at end of article.



"While most people would trace our ruin to to the bank guarantee of September 2008, the real error was in sticking with the guarantee long after it had become clear that the bank losses were insupportable. Brian Lenihan’s original decision to guarantee most of the bonds of Irish banks was a mistake, but a mistake so obvious and so ridiculous that it could easily have been reversed. The ideal time to have reversed the bank guarantee was a few months later when Patrick Honohan was appointed governor of the Central Bank and assumed de facto control of Irish economic policy.

As a respected academic expert on banking crises, Honohan commanded the international authority to have announced that the guarantee had been made in haste and with poor information, and would be replaced by a restructuring where bonds in the banks would be swapped for shares.

Instead, Honohan seemed unperturbed by the possible scale of bank losses, repeatedly insisting that they were “manageable”. Like most Irish economists of his generation, he appeared to believe that Ireland was still the export-driven powerhouse of the 1990s, rather than the credit-fuelled Ponzi scheme it had become since 2000; and the banking crisis no worse than the, largely manufactured, government budget crisis of the late 1980s.

Rising dismay at Honohan’s judgment crystallised into outright scepticism after an extraordinary interview with Bloomberg business news on May 28th last year. Having overseen the Central Bank’s “quite aggressive” stress tests of the Irish banks, he assured them that he would have “the two big banks, fixed by the end of the year. I think it’s quite good news The banks are floating away from dependence on the State and will be free standing”.

Honohan’s miscalculation of the bank losses has turned out to be the costliest mistake ever made by an Irish person. Armed with Honohan’s assurances that the bank losses were manageable, the Irish government confidently rode into the Little Bighorn and repaid the bank bondholders, even those who had not been guaranteed under the original scheme. This suicidal policy culminated in the repayment of most of the outstanding bonds last September.

Disaster followed within weeks. Nobody would lend to Irish banks, so that the maturing bonds were repaid largely by emergency borrowing from the European Central Bank: by November the Irish banks already owed more than €60 billion. Despite aggressive cuts in government spending, the certainty that bank losses would far exceed Honohan’s estimates led financial markets to stop lending to Ireland.

On November 16th, European finance ministers urged Lenihan to accept a bailout to stop the panic spreading to Spain and Portugal, but he refused, arguing that the Irish government was funded until the following summer. Although attacked by the Irish media for this seemingly delusional behaviour, Lenihan, for once, was doing precisely the right thing. Behind Lenihan’s refusal lay the thinly veiled threat that, unless given suitably generous terms, Ireland could hold happily its breath for long enough that Spain and Portugal, who needed to borrow every month, would drown.

At this stage, with Lenihan looking set to exploit his strong negotiating position to seek a bailout of the banks only, Honohan intervened. As well as being Ireland’s chief economic adviser, he also plays for the opposing team as a member of the council of the European Central Bank, whose decisions he is bound to carry out. In Frankfurt for the monthly meeting of the ECB on November 18th, Honohan announced on RTÉ Radio 1’s Morning Ireland that Ireland would need a bailout of “tens of billions”.

Rarely has a finance minister been so deftly sliced off at the ankles by his central bank governor. And so the Honohan Doctrine that bank losses could and should be repaid by Irish taxpayers ran its predictable course with the financial collapse and international bailout of the Irish State.

Ireland’s Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. Lenihan was overjoyed, according to a source who was there, telling the IMF team: “You are Ireland’s salvation.”

The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of US soft power, and in who our friends really are."

[The article gets better and better and eventually offers the only real solution to our current crisis from our current position that I can see]

You can currently read the rest of the article here:

*Many thanks to BC for bringing this article to my attention*

author by Tpublication date Tue May 10, 2011 01:04author address author phone Report this post to the editors

Morgan Kelly has produced yet another excellent article in the Irish Times in which as usual he is not afraid to spell out the situation and the disaster that awaits us. It is quite amazing that he was willing all along to say how it was yet all the other mainstream econmists with a few exceptions rarely uttered anything that went the fictional reality declared to be true by the government, estate agents, developers and of course those who really hold power the national and international financial institutions.

In his piece Kelly quite rightly declares that we should cut away from the thieves in the ECB/EU and much of his article relates to how particular gombees played their roles in getting us there.

Towards the end though he says the following:

National survival requires that Ireland walk away from the bailout. This in turn requires the Government to do two things: disengage from the banks, and bring its budget into balance immediately....
Cutting Government borrowing to zero immediately is not painless but it is the only way of disentangling ourselves from the loan sharks who are intent on making an example of us. In contrast, the new Government’s current policy of lying on the ground with a begging bowl and hoping that someone takes pity on us does not make for a particularly strong negotiating position. By bringing our budget immediately into balance, we focus attention on the fact that Ireland’s problems stem almost entirely from the activities of six privately owned banks, while freeing ourselves to walk away from these poisonous institutions. Just as importantly, it sends a signal to the rest of the world that Ireland – which 20 years ago showed how a small country could drag itself out of poverty through the energy and hard work of its inhabitants, but has since fallen among thieves and their political fixers – is back and means business

I agree with step 1 just like I am sure many others do, but step 2 leaves a lot of unanswered questions. What or how exactly does Morgan propose we cut borrowings to zero. Is he suggesting we tax the rich and charge 50% royalty on our national assets of oil and gas. If a series of FFs and PDs had not signed away our royalities such that now when Corrib Gas in Mayo does eventually produce gas, the Irish state will get zero!. Is Morgan proposing we reinstate these royalities that were taken away in a corrupt fashion? Is he proposing that corporations should pay the same basic tax rate that most people in the tax system pay which is 20% and not 12%?

In short where does Morgan Kelly stand on this? I don't know and can't tell but if it is for more austerity by gutting our health, education and the social net otherwise known as the social welfare system and the selling off of our state assets, then that is where I depart with Kelly. Because there are really just two camps in this new class war. There is the free market crowd and those who believe that society and the economy should be run for the benefit of the people and run by the people and where they make the decisions as to where to allocate resources and I doubt building apartments in a field outside Mullingar is what most people would decide. The free market boys did. They bet big on it and now want you to pay. If we are to believe this magical and mythical free market [and this is the message that has been pushed for at least the last 30 years, and because it has been drummed into us relentlessly unfortunately many people have absorbed and accepted it without giving it any critical thought.], then this system is supposed to give us a sustainable environment even though it requires infinite growth, prosperity for all, even though it rapes the environment, raise our standard of living which presumably means our level of education, physical and mental health, yet standards are falling, many are sick from pollution or depressed from this soulness crushing society and so on. Let's face it, the pretty mask is long gone from the face of capitalism. The free-market is making the rich richer and giving them more tax breaks and making the poor poorer and taking away all the welfare structures of health, education, social welfare, working rights and civil rights that have been built up over a century. And people in times past fought hard for these.

So getting back to Morgan's 2nd point, how we will reduce the state borrowings to zero? The question you have to ask yourself is which side of the fence do you sit on? Or you for sanity where the people decide and the benefits are for everyone. What we have got to recognize because the rich who have been in power for ever control all the media (O'Reilly and O'Brien) and most of the education resources (via the state and the state was run by FF and FG who both serve the rich) they have managed to convince most people that democracy = private banks and financial instutions and corporations decide most things. No democracy means the people themselves run society and decide and yet that seems such a radical idea even today.

So while I am sure Kelly wants to stir clear of nailing his colours to the mast, I think it is time that he should and lay this out in his next piece whenever that occurs and whatever his belief is then so be it. He has shown himself to be a brave and intelligent man so far, lets hope he is a humanist too.

The free market illusion belongs on the scrap heap of history along with "arbeit macht frei" otherwise known in English as "work makes you free"

author by W. Finnertypublication date Wed May 11, 2011 08:40author address author phone Report this post to the editors

Why is there no direct mention in the Morgan Kelly article of the banking “derivatives” issue: the exceptionally tricky and huge difficulty which lays at the heart of the global financial crisis?

Might it be because nobody, including Morgan Kelly, knows the full size of the enormous “derivatives” problem?

Related link:

author by TCpublication date Wed Jul 13, 2011 12:59author address author phone Report this post to the editors

I think Prof. Kelly has put forward a very strong arguement. I also think that he like many civil servants who actually care about the country are open to pay cuts. This is a cause for country above individual, it is such a pity that we have no faith in the people running our nation. Lastly I would like to say, although I have never been a SinnFein supporter, that the very fact that the SF TDs have taken cut salaries shows them to be a very strong party looking for real change. It is sad that our main parties can not offer leadership.

author by Rian - napublication date Sun Jul 24, 2011 11:15author email rianorr at hotmail dot comauthor address author phone Report this post to the editors

American banks were heavily invested in Euro soverign debt via CDS contracts. If Ireland was let off
the hook those banks would go down and in the pecking order US capital is first, what happens to
Ireland is way down the priority list.

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