What about Tom and whatshername? Enough to keep you awake at night.

Some things just are. You just can’t ‘fix’ them. You can put them off but not forever….. …it’s a bit like death. Why do people think that economies can just be ‘solved’? In a mathematical sense they can… … And that’s the inevitable problem.

Expect more thumbs down than up because most people are innumerate and that is why western liberal democracies delivered this crisis and will drag it out. I. E. Politicians can spout rubbish and people will believe what they want to hear. Just saying….

I’m expecting more thumbs down than up to prior ‘pessimistic/realistic’ comment because most people are innumerate and that is why western liberal democracies delivered this crisis and will drag it out. I. E. Politicians can spout rubbish and people will believe what they want to hear. Just saying…. …any ‘thumbs down’ want to articulate a comprehensive coherent solution. By solution, I do not mean one that shafts future generations.

The aim here is not to save the people it is to save the elite ruling this world. It only works to transfer private banks debt to the idiots tax slaves!

Tim, the banks were intermediaries. The money they lent ended up in other peoples pockets. True revolutionary socialists would go after them. Who sold the jury’s/Doyle site? Who sold the IGB site? Who sold the sites that all the ghost estates are on? It’s a ‘zero sum game’. There WERE winners and it wasn’t the banks, maybe some bankers though? And a few others too…

Seeing more thumbs down …. …. Right again. Thanks folks :-)

“Government-imposed expansion of bank credit distorts our “time preferences,” or our desire for saving versus consumption. Government-imposed interest rates artificially below rates demanded by savers leads to increased borrowing and capital investment beyond what savers will provide. This causes temporarily higher employment, wages and consumption.

Ordinarily, any random spikes in credit would be quickly absorbed by the system—the pricing errors corrected, the half-baked investments liquidated, like a supple tree yielding to the wind and then returning. But when the government holds rates artificially low in order to feed ever higher capital investment in otherwise unsound, unsustainable businesses, it creates the conditions for a crash. Everyone looks smart for a while, but eventually the whole monstrosity collapses under its own weight through a credit contraction or, worse, a banking collapse.

The system is dramatically susceptible to errors, both on the policy side and on the entrepreneurial side. Government expansion of credit takes a system otherwise capable of adjustment and resilience and transforms it into one with tremendous cyclical volatility.”
Mark Spitznagel

Two inter-related issues lie at the heart of this crisis. Currency and banks.
Governments and central banks have abused their ability to issue new currency in recent decades. This has lead to the expotential increase in total world debt.
Banks have exploited this situation and have become grossly inflated relative to the size of the economies they service. Without excessive monetary easing the expansion of the derivatives Market would not have happened.
Two measures will mitigate against the inevitable economic collapse:
Currency liberalisation- The Swiss learned this during the depression and have had a dual currency system since.
Banking evolution-This has been retarded in recent decades due to Market distortions. Besides selling dodgy products and becoming excessively large banks have fundamentally changed little. While a new generation of smaller more robust banks need to emerge.

Sean, I really like the idea of multiple currencies. Competition of currencies is very interesting idea, allowing private currencies to be traded freely, the currency fancied by the people would become most popular. Rather than the current legal tender type currency that can manipulated by central banks so that one persons saving are destroyed while another’s debt is destroyed by money printing of ‘quantitative easing’ ‘stimulus’ or whatever people want to call it. Freedom is all about choice.

I’d rather watch a Tom and Jerry cartoon . It would make me laugh . I can’t do anything to stop the McWilliams juggernaut coming down the road.

@ Stephen Devine

Nobody cares whether or not you expect thumbs up or down.

@ old nokia chargernnPoint taken. Gave u thumbs up for that comment. Just havin’ de craicn

I accept that no solution exists to the problem. However the ‘solutions’ that are being employed by the European Financial strategists Seem to be focusing on returning the markets to a state that will allow the financial institutions to resume their control over the vast majority of people in Ireland and abroad ,by the limited phased introduction of credit for both business and private use.We spend to live in todays world. Small businesses ,mortgages…car loans …..Credit cards…etc, All part of the daily lives we live and controlled by a few very influential institutions.The same ones who got us into this situation and the ones providing the ‘solutions’ to get us out. The frontline people for these various institutions were the bank staff who helped you through the form and said ‘ no bother ‘ you will get you house and your savings and pension are safe…etc.’ The professionals. Like you said …no solution…but who will be better off after the next round of cuts and the next…..Innumerate?…..when you have four young kids and your fridge is looking bare….and your power supply is under threat because your paying a fkn huge mortgage for a house worth half what you paid for it…you get my drift. Your real smart . Heres a numeracy problem for you….subtract three fingers and a thumb and spin on the result. Have a nice day

Reply directed to Mr Devine…..not Mr Prior…oops!

The nation state, by definition, would seem to be the priority for most countries…they being nation states.

But you do touch on the central problem. Nation states are relatively late historical developments, and a transitional phase towards a (hopefully)steady-state sustainable planetary system. The current corporate ‘globalisation’ is just the old imperial powers contending for exclusive hegemony, and is the problem we need to get past if we are to achieve an inclusive human system, before we poison the ecological nest(or blow it to radio-active dust).
National identities are fine for sport..but we can’t afford to play nuclear hurling. Time we found the human ID. I wouldn’t be too optimistic, given our hominid, but still pre-human, history. Lessons seem to last one generation only. There is more money in exploiting stupidity than promoting intelligence.

Theory: It seems that Society has less leaders than can be ‘bought off’ by capital?

The profits went a number of ways:
1. Via wages for unsustainable jobs into assets.
- But since we were in a bubble, the profits were spent on overvalued assets such as property.
- An increase in new car sales which are depreciating asset
- Into white goods and consumer electronics which are worthless after the fact
- The wealth that was transferred to consumers is therefore spent, and gone.
2. Into companies that make stuff
- But since we were in a bubble, and production was maximised, the price of raw materials went up.
- Companies leant on producers in places like China to maintain profit margins
- With all the big profits, and the demand for goods as the bubble inflated, the companies reinvested profits in production. This means they ramped up to meet future demand that never materialised.
- Cars lined up in their thousands waiting for export. Oil tankers floating around full of oil waiting to be sold to a producer (despite being bought and sold by traders 20 times). TVs in boxes.
- All that extra production capacity cost money, and is now mothballed. This includes industrial property (see 1 above)
- A lot of money is spent and not coming back
3. Into shareholders via dividends and increased share prices
- So some shareholders might have taken a profit selling stock at increased value
- Some people used their income to buy shares and invest in their future
- But the bubble inflated the value of these shares.

All of the above points to one thing. A massive amount of the money that was created in the bubble (created by fast and easy credit, and the multiplier effect) found it’s way into Assets that were overpriced. The bubble was (and still is, in a lot of cases) in everything. Property, commodities, shares, you name it. When a bubble pops, that wealth is destroyed.

There isn’t some guy sitting on the profit side of the ledger for every loss made during the collapse. The money inflated beyond control, and asset prices rose to meet it, as demand for assets and consumer goods increased. The money was spent on tat, new cars, new tvs, over-priced houses.

Sure there’s a few savvy people, and a few accidental beneficiaries sitting with money in their accounts, but there’s no trillions squirrelled away by corporations to match the losses. Some money was kept, yes, but a lot of went on increased costs for raw materials, labour, assets etc.

There is only one group I can think of who genuinely kept their slice of the money, and that’s the oil companies. Oil is the key driver of production, after all, and it’s price and supply is managed by cartels. They’re sitting pretty here: http://money.cnn.com/magazines/fortune/fortune500/

Thanks for the post Ronan…interesting analysis but it’s hard to buy into all of it. You suggesting it was mostly blown on worthless consumeristic trash & property asserts? How can wealth simply vapourise over a relatively short period of time without a good tranche of it ending up somewhere? Surely mulltiple trillions exist out there … among the very wealthy & anonymous Chinese corps maybe, no?

@Paul it’s very possible.
A simple example is an apartment bought for 300k in 2007, now worth 150k. There should be a 300K asset to back that loan, but 150K is wiped off.
The government took 60k in VAT and set up a quango for their friends.
The builder and subbies got paid.
The developer and land owners made money, along with the raw materials providers.
The rest disappeared in wages and costs.
The real profit among them did not come to 150k. So the net result is that an asset worth 150k (or probably less) was created, and let’s say for example 50k in new capital (profit) That’s 200k in assets for 300k in liabilities. Wealth destruction due to overpriced goods (materials) and assets (land and created dwelling).
Unfortunately the 50k then went into creating more imbalance in bubble assets.
I can assure you that every dollar of banked profit from the global credit boom, we created multiples of that in liabilities. The liabilities are sitting on bank balance sheets, and there isn’t enough banked profit to cure the illness.
We printed money, via credit, backed by overpriced assets. The above is overly simplistic, and missing many variables. I simply want to convey that one mans losses are not another mans profits, as wealth is being destroyed.
We let money expand too much, with nothing to back it but the confidence we placed in asset prices. This is what a bubble is. All the extra money flowing into the overvalued assets is essentially a pyramid scheme, started in investment banks as they created more and more money to fund it, with homeowners sitting at the bottom.
There’s a slow process of catch up, as people save and pay down debt. This is productive capacity creating capital, but we’re fighting the deflation in a system where the illusion money wants to contract. Central banks are creating money, but it’s finding it’s way into commodities and assets, propping up a false floor. Eventually, they will confiscate money by inflating the system, in my opinion

@Paul,

I forgot to mention, much of the Chinese wealth is sitting in bank vaults in the form of US dollars, which they buy to counteract constant devaluation by the Federal Reserve. The rest they are spending on their own asset bubble (500k apartments in Beijing with no tenants), German cars and luxury goods. Go to Antwerp and ask the diamond dealers what’s keeping the price of gemstones high while the western economy is reeling.

They’re in their own bubble, emulating their Japanese neighbours in the 80s. Remember that first colour tv you got in the 80s? Remember your first Walkman? That was us buying cheaper Japanese goods, and they didn’t know what to do with the economic growth, so they spent the proceeds on property and created the bubble. China is hurtling towards that same precipice.

Sorry Ronan, money that is borrowed and spent on an asset does NOT disappear. Some may spread out. But a large proportion of the ‘bad’ lending was to a select few who spent enormous amounts in large chunks. You’re suggesting that’s not sitting in large amounts in ‘balance sheets’ of those who profited. It is a ‘zero sum game’. That is an indisputable fact.

Whatever about his video you also need to consider his personal recommendation to guarantee all Banks in 2008. It is incredible how some people have short memories. As an economist, David McWilliams has lost his credibility. His advice resulted in a debt to GDP of 32% in September 2010.

This is what David had to say about the conversation with Lenihan. Advocated the Swedish model which he claims was not followed by the govt.

http://www.davidmcwilliams.ie/2011/11/15/recent-inaccuracies-re-the-bank-guarantee

Glass Steagall is the answer to this mess. The casino banks should be separated from the assets of ordinary people. The pensions and savings should be propped up by government and the gamblers should be told to go away and sort out their own junk derivitives. They can choke on them for all I care.

We are always told we borrowed too much during the bubble. Be that as it may, the defaults on public debts could have easily been absorbed by the money which bailed out the casinos. Instead we are feeding a black hole hoping that a default will not cause a credit default swap cascade.

All we are doing is bankrupting the state and leaving ourselves open to wholesale looting by the bankers whom we gave the money to in the first place,

I am also very suspicious of how we gave away all our resources before the crisis. Brown sold the UK gold on the cheap just before inflation really kicked in. The UK also excluded house prices from the inflation figures and allowed real assets to be used for funding retirement before the low interest and subsequent inflation kicked in. They didn’t see it coming? Pull the other one.

It’s time to re-negotiate the oil contracts and fishery agreements. There are markets outside the EU you know.

It always has in history

Of course, it’s only a matter of time. Calling when that will be is the trick…

sad,but yes.

At least David Mc Williams has been correct in the past unlike many other commentators.

Thumbs up from me… …and I’m a hurler too!

@ hurler

You don’t read much, do you? David McWilliams advocated the 2008 Bank Guarantee. He personally recommended it to Lenihan.

Profit of doom? This guy warned all the idiots in charge at the time that a property crash was coming and stop lending stupid money. McWilliams is the man you should listen too! He is still trying to warn the government to stop spinning the property market and let it hit its natural bottom, but no the greedy idiots are ignoring him again. Fools!

Profit of doom? This guy warned all the idiots in charge at the time that a property crash was coming and stop lending stupid money. McWilliams is the man you should listen too! He is still trying to warn the government to stop spinning the property market and let it hit its natural bottom, but no the greedy idiots are ignoring him again.

Are you listening to the argument on its merits Tim or simply dismissing it because it’s from DMW?

DMW advocated a guarantee of bank deposits – not of liabilities.

I generally agree with DMCW, I’m just becoming tired of this incessant negativity from all sources. We cannot develop our economy while in negative mode. Any positive economists out there? Any…

Positive economists??Try Iceland.

You want positive comments?

“DMcW Rocks!”

QED

Those of you comparing about DMcW’s negativity…….eh aren’t you just complaining?

You sound like the Captain of the Titanic saying “I’m tired of all this negative talk about ice fields and icebergs, why can’t we just talk about the sunshine and the nice big white things in the sea”…..

Is that fact or hearsay?

And your alternative analysis would be…..

I would stop corporate socialism and allow Anglo Irish Bank to fail without sacrificing the Irish people and their livleihoods for a globalist banking Mafia.

That’s not a bad idea Tim. Does not solve the problem articulate by DMW video.

He didn’t advise the blanket gaurantee that Lenihan put in place, but don’t let the truth get in the way of a good rant.

Norman Hunter,

McWilliams proposed a blanket guarantee of Irish banks which Lenihan subsequently embraced. Instead of letting them fail and then picking up the pieces and recapitalizing, Lenihan took the nuclear option.

According to Lenihan who lets be honest wasn’t noted for telling the truth.

Sorry Tim. McWilliams recommended a limited guarantee for depositors to Lenihan, not the blanket guarantee that Lenehan went ahead with. I think most people would have agreed with that. Nobody would like to imagine that ordinary savers would have all their savings wiped out.