Tag Archives: bondholders

Politicians – Misled or Misleading on Anglo.

anglosunWe don’t have to pay a cent to the Anglo junior debtholders but we probably will. Below I walk through why the Government are either misled or misleading and opine on how we can avoid payment. We have a legal template, which could be tabled. FF should continue to drink its tall glass of STFU on Anglo, so it is down to the opposition. Sinn Fein are busy posturing on meaningless motions on the Taoiseach, the anti-austerity-unless-its-a-party-leaders-allowance-before-logic-party is doing whatever it does, so really its down to people like Shane Ross, Stephen Donnelly, Tom Pringle and so on, the (apparently ) concerned left and right, to table this.  Continue reading

Enough, already, just pull the plug on Anglo before its too late ; September 2 2010

Id had it with the arguments that Anglo could be saved. Here is my oped in the Irish Times on 2 September 2010. Enough already…

OPINION:Ordinary folk have paid enough. Subordinated and senior debt holders should cover the rest

THE HORRENDOUS losses of Anglo Irish Bank come as no great surprise to informed analysts of the banking catastrophe. The Government s solutions amount to no more than insisting the taxpayer must, under all circumstances, bear all the losses Anglo will continue to create. This cannot be borne.

That there are significant additional losses to come from Anglo is undoubted. The Government and its proxies continue to assert, without placing in the public domain any detailed analyses, that the losses will be capped at EUR 25 billion. This is the same process that has successively asserted that the losses will be EUR 4.5 billion, EUR 12 billion, etc. Why are we expected to believe them now, when they have proven to be wildly inaccurate in the past? Analysts inside and outside Ireland believe Anglo s losses will be at least EUR 35 billion with potential for EUR 40 billion-plus.

Anglo, like all banks, is funded in five ways: deposits; borrowings /deposits of a short-term nature from other banks and central banks; longer-term borrowing (senior debt); longer-term borrowing with less protection (subordinated debt), and by shareholders. The question that arises is simple: which of these should be protected in full, and which in part? It is startling that, as of now, only the most junior party, the shareholders, have been asked to take the full consequences.

Some subordinated debt has been (voluntarily) renegotiated, but there remains some EUR 2.5 billion of subordinated debt in Anglo. This should now absorb the next EUR 2.5 billion of losses. It is unfortunate that the Government has guaranteed some of this, but this is a legislative act and can be unwound.

Beyond that, we are into the realm of senior debt holders. Anglo has borrowed some EUR 14 billion from such investors, of which some EUR 7 billion is repayable in September. It is now beyond time that these investors be informed that their investment is not fully payable. There is more than enough in the subordinated and senior bondholders to absorb even the most pessimistic estimates of losses to emerge from Anglo. We can, and I say we should, consider this.

We are told by the Government that to do so would be a sovereign default. This is palpable nonsense. Anglo Irish is a private institution, which has some elements of its capital structure guaranteed by the Government. It is not the State. The reason the guarantee was given was the fear that allowing Anglo to be wound down in 2008 would have precipitated a cascade of Irish bank failures. While this is debatable, we are now in 2010. The taxpayer has paid enough.

Governments have a genuine concern that if a state defaults, it may not be able to re-access bond markets. But even if we allow the fantasy that Anglo is the same as the State, assertions that this chimera would be locked out of the international bond markets are false, and are pedalled as a scare story to frighten the taxpayers and citizens into ponying up sovereign money to bail out private investors.

Bond investors look forward what they are interested in is the risk that they will not be repaid. A history of default will of course impact on the amount of money they will lend, and the price they will charge. But the evidence is that even serial defaulters can gain funds on an ongoing basis.

Academic evidence, including papers from the International Monetary Fund, indicates absolutely no evidence that sovereign investors are permanently excluded from the international capital markets after a default. Even in the rare cases of temporary exclusions, in the sense of not being able to issue bonds, this rarely lasts for more than two years. In addition, the evidence is that any increase in sovereign debt costs is short-lived and transitory. We have to decide: is the price for the taxpayer of any increased cost of lending if we discontinue support to Anglo, less than the cost of continued support?

There is in my mind no question now but that there is a moral, political, economic and social need for the subordinated and senior debt holders of Anglo Irish Bank to bear the remaining costs. There is a timing problem, however any announcement of the intention to force these losses on the senior bondholders would have to come prior to the renewal of the guarantee at the end of September. Thus, the next three weeks are critical.

There is an argument that this decision to withdraw the guarantee should be taken in conjunction with another. The State is now paying more for money than it would if it were to access the EU stability fund. The judgment of the bond markets is that the combined banking and fiscal crises are such that Ireland is no longer a sound bet. A very large part of this is the increasing concern that there is not the political will to deal with either of these problems, never mind both.

Pulling the plug on further taxpayer involvement in Anglo may best be done at the same time as announcing that we are to seek the assistance of the EU in restructuring our fiscal position.

It is time to seek to place ourselves in the hands of people who can run the State effectively and in the long-term interests of the citizens. Political or indeed national pride should not stand in the way of this.

Brian Lucey is associate professor of finance at Trinity College Dublin

We must deal with Mortgage debt to move on : November 11 2010

Another multisignatory oped in the Irish Times, this time on the need for mortgage debt, with some writeoffs, being needed.


Economists Constantin Gurdgiev, Brian Lucey, Stephen Kinsella, Ronan Lyons, Karl Deeter, Shane Whelan, David Madden, Brendan McElroy, Valerio Poti and John D Masson suggest a way to help mortgage defaulters

THE BURSTING of the boom has left tens of thousands with debts they will never be in a position to repay. These debts are poisoning the balance sheets of Ireland s banks, preventing the emergence of an economic recovery, as well as causing untold social misery. As a society, we must face up to this.

Two main problems exist: first, hundreds of thousands of people now find themselves in negative equity, where the value of their primary residence is less than the loan secured on it; and second, more than 100,000 also find themselves in difficulty paying the interest costs on their personal home loans.

With house prices continuing to fall, interest rates set to rise, after-tax disposable income falling and unemployment remaining high, there is a massive socioeconomic problem to be addressed.

Current asking prices suggest that 200,000 households are in negative equity, the majority of 270,000 people who bought between 2005 and 2008. Figures from June show 36,000 mortgages were in arrears of three months or more, with collective arrears of just over half a billion euro. These figures do not account for tens of thousands who have renegotiated, switched to interest-only repayments or obtained a reduced repayment schedule for a period of time.

If house prices fall by 55 per cent from the peak, half of buyers in 2004 and a quarter of those in 2003 would enter negative equity and 200,000 households would face negative equity of more than EUR 50,000 and there would more than likely be 60,000 households in arrears.

Their arrears of EUR 10 billion would compare to total mortgage debt outstanding in the Republic of EUR 115 billion. In the context of an overall bank bailout scheme of EUR 50 billion and rising, it is relatively small but at the individual level and, equally importantly, at the level of the real economy, it is a very large problem indeed. We suggest that this makes full or partial debt forgiveness a viable consideration. From an economic perspective the key question is: how would partial debt forgiveness affect the Irish economy?

Individual households in debt do not spend, they do not invest: they attempt to pay down debt when and where they can and they hoard cash. Arrears and negative equity lead to reduced entrepreneurship in the long run, as distressed households face both less wealth against which to borrow and more uncertainty about their income and safety-net savings.

In Ireland this is compounded by the draconian, outdated and entirely inappropriate laws on personal bankruptcy, the lack of non- recourse mortgages and the effect bankruptcy judgments have on an individual s ability to engage in business.

These cumulative economic effects can be tackled through a debt forgiveness mechanism. Banks must allow private home borrowers to revert to pre-crisis debt burdens. Ireland s banks must acknowledge that current debt levels are unrealistic and that timely write-offs are necessary.

Unable to control the external value of our currency, we need to replicate the effects of a devaluation internally to regain international competitiveness. The problem with deflation (and we are experiencing a brand of it) is that as price levels fall, the pain of the debt increases. Generally a policy choice is to inflate the debt away, but in Ireland, we typically do not issue loans on long fixed rates so, even if we could devalue our currency, borrowers would still be crippled as rates shot up. In the long run, socially and economically, debt forgiveness is the best option.

Internationally, more advanced menus for systemic mortgage default crises cover a wide range of options. Successful debt resolution regimes set the cost of restructuring at levels where households ability to pay preserves the value to lenders, in excess of what can be achieved in an immediate foreclosure.

In the case of Ireland, such a formula would most likely lead to an implicit writedown of at least 30 per cent of the more recent mortgage amounts on average, yielding an expected total cost to the entire system of circa EUR 37 billion to EUR 49 billion.

In Ireland, there were two initial responses to the crisis. The Government forced banks into signing, then extending to February 2011, a moratorium on repossessions, meaning lenders must wait at least a year from the time arrears first arise before applying to the courts for a repossession order.

Privately, people have been exhausting their savings, and that of family and close friends, to stave off slipping into arrears. Both of these are stop-gap measures and new approaches are emerging.

Publicly, the Expert Group on Mortgage Arrears has proposed reforming bankruptcy and introducing non-judicial debt settlement. Privately, Ireland is seeing more and more accidental landlords as people rent out their home and either move back in with parents or become tenants elsewhere. These are, in the end, only temporary and partial measures.

We suggest that as there are three parties to the problem the banks, the regulator (ie the State) and the individual these three must also be part of the solution.

For persons in negative equity, or where the loan is so large that it is becoming distressed, we suggest some degree of individual debt forgiveness and restructuring.

There is an argument of moral hazard that must be addressed if individuals do not suffer the consequences of their actions, then there is a reduced incentive for them and for others to behave in a sensible fashion. We argue that the existing levels of distress, plus the partial nature of the debt forgiveness help to mitigate this. People have already been burned and this lesson will not, it is to be hoped, be lost.

In addition, the banking and regulatory systems have collapsed and are in the process of being rebuilt. Central to the new systems must be a set of regulations, rigorously implemented, which prevent this problem from recurring and which will realign incentives properly to price risk in lending by shifting some of the burden off the shoulders of the borrowers and onto the lenders.

In order to implement this burden-sharing, a binding arbitration process needs to be put in place, to allocate the excess burden. In addition, we need urgent changes to the bankruptcy laws and to introduce the non-recourse mortgage option.

The request for entry into arbitration can be initiated by the borrower or lender. The arbitrators, which could be Mabs or some other independent organisation, would be empowered to determine either the allocation of any negative equity burden or to alter and adjust the mortgage terms.

For lenders who refuse to enter into arbitration, alterations to the mortgage code or ultimately the withdrawal of licence are appropriate responses. The public good is best served here by forcing the banks to take the great part of the losses for which they were responsible, not forcing the hard-pressed homeowners to take an unbearable burden into the future where they will inevitably buckle under the strain of repayment with disastrous social and economic consequences.

The losses that will be crystallised in the banks can be filled with additional Nama bonds now that we have Nama, we may as well make some use of it. This will increase the interest burden on the taxpayer, or in the end perhaps on the ECB but we argue that, in the overall socioeconomic context, debt forgiveness to the maximum feasible extent is a first step to restoring the economy and society.

Dr Constantin Gurdgiev, lecturer in finance, TCD;

Prof Brian Lucey, school of business, TCD;

Dr Stephen Kinsella, lecturer in economics, University of Limerick;

Ronan Lyons, Oxford University and Daft.ie;

Karl Deeter, Irish Mortgage Brokers;

Dr Shane Whelan, actuary, UCD school of mathematical sciences;

Prof David Madden, school of economics, UCD;

Dr Brendan McElroy, department of economics, UCC;

Dr Valerio Poti, lecturer in finance, DCU;

John D Masson, lecturer in economics, UCC.

A smack from the IMF : June 26 2009

the IMF weighed in in June 2009. It was spun as approval. It wasnt. Here is my Irish Times reaction piece


OPINION:The IMF report most certainly does not give Government banking policy the thumbs up, writes BRIAN LUCEY.

THE STATE of the Irish banking system remains parlous. This is particularly evident in its capital base. Notwithstanding the financial engineering of recent months, which has released capital through debt restructuring, Irish banks remain undercapitalised to meet regulatory and likely future losses.

Estimates by Oliver O Shea ( Restarting flow of credit the most immediate challenge facing main banks , The Irish Times, May 23rd) suggest that even under very optimistic scenarios total capital available to the main Irish banks is no more than EUR 50 billion. It is also useful to recognise that regulatory minimum ratios for capital are now significantly less than the market desired ratios. In plain language, although banks may well pass legal tests of being adequately capitalised, they may not pass market tests.

The present state of the Government s dealings with banks might best be described as piecemeal a smidgen of guarantee here, a dollop of preference shares over there, a bit of urging to restructure here, a nudge towards bolstering common stock elsewhere, and an overarching commitment to preserve the banks in as majority a public ownership as possible. Meanwhile, banks profit bases remain under stress and are unlikely to provide the tens of billions required to rebuild the balance sheets.

The International Monetary Fund (IMF), in its article IV consultation report just published, places the banking crisis front and centre. Its analysis of the response of the Government is damning. It is important to recognise the report is ultimately a political document and would have been drafted and redrafted. Thus any comments critical of the actions of the State must be read as having passed through several formal and informal filters prior to final publication.

The IMF starts its analysis with an estimate of bank losses of some EUR 35 billion. It is a massive indictment of the quality and competence of Irish economic governance that they state, on page 15, The authorities did not formally produce any estimate for aggregate bank losses.

In plain language, the Department of Finance either did not present or did not have any idea of the scale of the likely losses. It quite literally beggars belief that nine months into the crisis this could be the case. If the department does not have estimates, then it is grossly delinquent. If it does have estimates, and did not present them to the IMF, then one wonders what is being hidden. In any case, a loss of EUR 35 billion would render the Irish banks undercapitalised from a regulatory standpoint and most probably would result in their being economically insolvent.

The IMF report then examines the National Asset Management Agency (Nama) and emphasises over several paragraphs the importance of the new agency cleaning up the bank balance sheets swiftly and completely. Yet, we see (on page 19), They [the Department of Finance] agreed that piecemeal efforts could keep banks dependent on official support and unable to resume normal functioning. The Japanese experience is particularly cautionary.

This should chill the blood of any reader: the Department of Finance, which has led partial effort after partial effort to solve the banking crisis, and which is committed to more partial efforts, accepts that if these do not work, the economy faces a lost decade. Indeed, in that paragraph, the Department of Finance is reported as saying also: The authorities took note of these considerations for their further deliberations on setting up Nama.

Nine months into the crisis, five months after Nama was announced, and the department is considering further deliberations on Nama? No rush lads . . .

The IMF concludes with an analysis which echoes in all important elements the opinion in this newspaper (April 17th) of 20 economists (of whom I was one) that nationalisation plus Nama may be the way forward. The report states, Staff noted that nationalisation could become necessary but should be seen as complementary to Nama. Where the size of its impaired assets renders a bank critically undercapitalised or insolvent, the only real option may be temporary nationalisation . . . Having taken control of the bank, the shareholders would be fully diluted in the interest of protecting the taxpayer and thus preserving the political legitimacy of the initiative. The bad assets would still be carved out, but the thorny issue of purchase price would be less important, and the period of price discovery longer, since the transactions are between two Government-owned entities. The management of the full range of bad assets would proceed under the Nama structure. Nationalisation could also be used to effect needed mergers in the absence of more far-reaching resolution techniques.

Recall when reading this that the IMF has stated the losses are such as to leave the banks in a position of undercapitalisation at best. This argument from them echoes the almost unanimous consensus of academic finance observers. However, undaunted, the department (who, remember, don t seem to know the magnitude of the problem they are trying to solve) disagreed. However, their arguments (on page 19 of the report) are straw men the need for nationalised banks to operate under the same regulatory regimes as non-nationalised ones, the need for a clear exit strategy, the need for lack of politicisation of lending that have been discussed and to which solutions have been suggested in many forums including this newspaper.

So we are left with a Minister committed to incrementalism in solving a crisis the magnitude of which his department professes ignorance of, an incrementalism the department agrees runs the risk of a lost decade, and a determined if unargued rejection of all advice (internal and external) relating to the efficacy of the sole solution proposed.

And we wonder why the country is in crisis?

Brian Lucey is associate professor in finance in the business studies department of Trinity College Dublin

A document is not a plan : December 20 2008

Remember the government had a plan in 2008? Remember that? Here are my thoughts on that at the time


OPINION:This week we were given a woolly document lacking clarity, consistency and logic, writes Brian Lucey

WITH THE onset of the recession, much talk has emerged of a return to the 1980s. We might do well to remember the injunction written in bold on the face of the mythical Hitchhiker’s Guide to the Galaxy, which was “don’t panic”. This is advice the Government might well take to heart.

The Government is facing unprecedented challenges economically – not only is a full-blown recession now crystallised, but the banking system sees its capital eroded daily and a pensions crisis looms in both the public and private sector. However dire, these are soluble problems given leadership and clarity.

It is in this context that we must judge the plan announced on Thursday for economic recovery. If it is not to suffer the same negative reaction as the bank plan, we would expect to see clarity and simplicity. Neither are obvious, with a document running to more than 100 pages replete with analyses and aspirations but lacking, to my mind at least, a clear focus.

The context for this document was the third quarter of 2008 national accounts and the ESRI report published yesterday. Both confirmed what was already suspected – the economy did not experience a soft landing but has instead crashed in spectacular fashion. This confirmation was foreshadowed by truly disastrous retail sales figures and recent rises in unemployment.

The ESRI is not known for its hyperbole, and this makes its latest report sobering reading. It predicts that in 2009 the economy will shrink across the board, with unemployment rates again in double digits, against a backdrop of a marked deterioration in public finances. In that context, immediate decisive action would reasonably be expected but this has not happened.

The recovery plan announced by Brian Cowen has three major elements: restoring the public finances; dealing with the immediate consequences of the recession’s victims; and positioning Ireland for the future.

All of these issues, however, are discussed and analysed in the document, with paths forward identified and options noted. In many respects, it reads more like one from an external body such as the OECD or an election manifesto rather than from the office of the leader of the country.

There is a sense throughout that someone should do something, with little specifics on what the Government will do in the immediate future. And where there are specifics, there is some evidence of lack of internal consistency.

For example, the single largest immediate problem facing the economy is the mismatch between expenditure and revenue. On the revenue side, we have a narrow tax base, with preponderant taxes being raised on consumption and earned income. Despite this, the plan merely encourages the Commission on Taxation to consider a speedy conclusion to its work on examining a wider tax base.

Indeed, the document later goes on to explicitly rule out much movement in relative tax incidence. A key feature of the problem we face is our high cost-base, in part due to high direct and consumption taxes – but again this is merely noted with no specifics given for how it is to be addressed.

For young unemployed people, encouragement will be given to them to take up unused places in institutes of technology but there is no analysis of the likely impact of this on the already unacceptably high dropout rates in the very programmes identified.

To reinvigorate the International Financial Services Centre (IFSC), it will be vigorously promoted to sovereign wealth funds and specialist services, but there is no specificity on why these would want to move to the IFSC, what the comparative advantage is of the IFSC in these areas and, crucially, no indication of the Government implementing the 2007 PricewaterhouseCoopers report on financial services education.

There are many other examples. Overall the document reads not so much as a blueprint but as an aspiration, one that moreover appears at times to lack internal consistency and logic.

Two elements of the document show its weakness very clearly.

First, the document repeatedly makes reference to increases in Science Foundation Ireland (SFI) and related funding, all predicated on moving towards a knowledge economy. However, all available research indicates that fundamental research skills and fundamental skills in the basics of educational attainment (the three Rs) are more important in determining long-term economic success than are targeted initiatives such as SFI – no matter how useful they may be as “add-ons”.

In this regard, the most glaring omission from the document is in regard to tackling the deficit in mathematics skills in Ireland. Report after report has indicated that this area is the single greatest constraint on positioning Ireland for the future high-skills, high-value-added economy.

Mathematics are mentioned twice in a 102-page report, in the same paragraph, where the problem is merely nodded towards. Against a background of overcrowded classrooms, a lack of specific mathematics teachers in the primary level and increasing difficulty in third level in finding students with the minimal level of mathematics to take IT and science subjects, the level of aspiration is high and detail low.

Second, a further key building block of the document is the creation of a venture capital funding mechanism to direct investment towards high-tech start-ups. Throughout the report, attention is drawn to the underdeveloped nature of the Irish venture capital sector, despite the reasonably favourable tax and related infrastructure for it that already exists.

The proposals are in essence threefold: to create a set of five funds totalling approximately EUR 500 million with the National Pension Reserve Fund (NPRF) injecting half and external private equity half; that these would invest with a seven-year horizon; and that they would invest in “early stage RD intensive SMEs”.

The underlying implications are that there is an existing failure in the market that starves these sort of enterprises of this funding, that there are returns to be made for the NPRF from such investments that are at least as good as can be made elsewhere, and that this investment is the appropriate form of investment.

All of these can be challenged.

Venture capital is a catch-all phrase that can be taken to encompass a wide variety of investments from angel capital (at the very initial stage of conception of an idea) through private equity for buyouts. The evidence is overwhelming that angel capital, not other forms, is the essential element of funding for start-ups.

Regardless, the evidence from the European Venture Capital Association is that early-stage venture capital returns close to zero over a five to 10-year period such as is envisaged here.

Finally, there is a thriving venture capital sector in Ireland but, given the preceding facts, it is not surprising to note that it is concentrated on buyouts and reorganisation. Now if only there was a set of distressed companies in Ireland that the NPRF could invest in . .

Overall the document is not yet a plan. It is a precursor to a plan. What we now need to hope for is that the plan, when it does come, will come from the office of the Taoiseach and the Minister for Finance and not from that of Mr Strauss-Kahn of the IMF.

Brian Lucey is associate professor of finance at the school of business studies in Trinity College Dublin

The Banking Union: what’s in it for Ireland?

This is an expanded version of an OpEd in the Irish Examiner published 15 December 2012

Group Chief Executive of the Bank Of Ireland, Boucher, reacts during an interview with Reuters at the company's head office in Dublin, IrelandThe new banking union proposals that are now emerging from the wreckage of the European economy are to be given a (very) cautious welcome. Without going the whole Naomi Klein “shock doctrine” route, its very clear that once again this is a win for (mainly german) banking interests. They for one have not wasted a good crisis, unlike our hapless crew of permanent and transitory governments. Banks have walked away scot free, in essence, from the calamitous decisions they have made. In Ireland, faced with a government as weak as water they essentially bluffed and buffaloed a hapless crew of inepts into socialising the losses. Anybody who think that senior bank management have learned their lesson of humility need only look at the truculent faces when the elected representatives dare question their remuneration.

1-leg-stool1A banking union required three essential elements: a common supervisor, a common system of deposit insurance or assurance, and a common method to resolve problems. What we have here is the first, and its as good a place to start as any. But without the others its a onelegged stool. The power in European banking has now shifted decisively to Frankfurt – already building an new towerblock (for a cost of over a billion euro…) the ECB will soon need more space. As presently proposed the effect of the new regulator will be to shift regulatory control of AIB, IBRC and BOI to Frankfurt. What exactly that will mean for the newly beefed up regulators office in Dame Street (the beefing up requiring that it move to the IBRC shell – very apt) is unclear. Will staff move to Frankfurt or more probably will it be a remote operation?

Two issues emergent from this require us here to think long and hard. These are the future funding of SMEs and the future of those vile promissory notes

On SME funding the Irish banks are in a bind. They need to continue to delever, and the only way to do that is to progressively increase the deposit base (costly) and/or reduce outstanding loans. In particular, reducing loans will be done while also shifting the balance of loans away from riskier towards less risky ventures. Lending to SME’s is inherently more risky than to more established sectors and ventures. The easiest venture at present is to obtain cheap money from the ECB and purchase Irish government bonds, a carry trade as it is known, reaping a handsome profit for the banks and incrementally driving up the price and down the yield on these bonds yielding a handsome political dividend for the government. Evidence from the ECB biannual survey on access to finance that along with Greece Irish SME’s are the most likely to be discouraged from applying for credit. Although only around 10%, this is unfortunate – discouraged borrowers may be borrowers that have excellent prospects but feel that there is no point seeking a loan. Since March 2010, when the data series begins, excluding property and financial services related lending, lending to the SME sector has fallen by 24%, while in the overall economy it has fallen by 22%. Within the SME sector lending to property and financial services related activity has risen by 30%. Its hard to see how this is justified given the job creation engine that the SME sector can be. As banks regulatory oversight moves more and more remote it is likely that the existing centralization of lending decisions at HQ will intensify. It is reasonable to assume that local managers of banks are more likely to be at least approachable by local SMEs seeking finance. If we wish to reduce discouragement in applicants we need to be very nimble in negotiating the parameters of this new regulatory regime. It’s a good job we have a history of nimble wily negotiators with the ECB….




















IOU_1The creation of the new regulatory framework was a quid pro quo for the establishement of the new ESM lending framework. This will lend to banks for new capital needs, finally breaking the linkage between the soverrign and the banking sector. However, this is of little use to Ireland. We have invested 24b in the pillar banks and 30b via the wretched promissory note in IBRC. The proposal on the table will not give us any relief on these. The government in march 2012 engaged in a complex shell game to avoid payment of the note but this was for a one year basis. Despite this can kicking they continue to claim that they have avoided repayment, which is simply untrue. Thus a solution to the deferred 3.1b and the regular 3.1b needs to be found before march. All indications are that this will involve a restructuring of the repayment schedule, to reduce the amount of money destroyed from 3.1b to perhaps 1b per annum. That anyone outside a lunatic asylum would consider it acceptable for a state so broke that it is cutting respite care to carers to destroy a billion euro shows how degraded our political debate has become. After Minister Rabbit stated that we would not pay in March I asked the Central Bank, the ECB and the government for a statement. Despite being the ultimate loser in any refusal to pay the Bank declined to comment. The ECB reiterated the statement by its president that it was Frankfurts way all the way, while the government press office reiterated that we hadn’t paid in 2012 and were seeking a deal. None of these give any hope that a meaningful reduction in the outstanding debt, as opposed to some restructuring of the payment schedule, is in the offing. That wont prevent the government from touting some form of interest reduction or extension of the repayment schedule as a triumph. But it should.

The Austerity Dictionary

This started out as a little crowdsourced joke on Twitter, with the hashtag #austeridictionary (note the spelling). A link to the ongoing discussion/madness is https://twitter.com/search/realtime?q=%23austeridictionary&src=hash. I used SearchHash to collate the hashtagged tweets, into a CSV folder, which I  then cleaned up in Excel. Its a bit of fun, but also like all good satire has a bite. The words we use are important. Using phrases in a Humpty Dumpty like manner, where going forward means going backward, where recovery means stagnation etc is an abuse of both language and the intelligence of people. A  great feature of Ireland is that we dont take ourselves too seriously. The problem is that sometimes neither does anybody else! In any case, cleaned of the most clearly libelous and obscence, here is The Austerity Dictionary


4: amount by which BBC salaries are multiplied to get equivalent levels at RTE
52:  Typical age at which senior civil servants are entitled to retire on fat pensions
AAA: austerity anonymous ahoy
Acting the Cowen: To deny that a bailout happens when it’s inevitable, and more than likely, it happens the next day.
Adjustment: Deflation
Adjustment= gov process of deciding who gets to live and die, while gov feathers its own nest.
AIB: Anglo Irish Bank Light
AIB: Another Irish Bailout
AldiLidl (n) : A grocery depository used in place of a Superquinn in lean times.
Alivestock= people for export to foreign lands (21st century replacement for slavery).
an Anglo: an obscene but unquantifiable amount : that will cost you an Anglo to repair is say.
Anglophiles: Former c-suite executives of Anglo Irish Bank?
Another Mass, Is there anything to be said for saying  : Economic recovery policy as outlined by Dana.
Arseterity (noun) a pain in the arse brought on by austerity.
ATM  :symbolic, totemic, device used as rallying call to pacify & direct population cf.  The ATM’s will stop working
ATM : a three letter word, preceded by the phrase ‘no money in the’ used to frighten the bejaysus out of Joe Soaps
Austere a Tea: Bitter, acidic and putrid drink consumed by the Irish for generations to come
Austerity [n] The taking of money from passive citizens and giving it to wealthy gamblers.
Austerity Dictionary: A Lexicon describing the semantic disparity between a government’s + society’s understanding of the same economic lexis.
Austerity: Cargo cult popular with European political elites
Austerity: Cutting back on education resulting in mispelt #hashtags
Austerity: German invention to isolate mistakes, so Merkel won’t have to admit debt trail leads to her banks
Austerity=Pushing the losses of a failed financial system on citizens in the HOPE it’ll lend to them & their state again.
Australia: destination of unemployed since 1788 to the present
Backing Childrens rights with one hand whilst stealing the Childrens money with the other hand
Bailout: Monies given to allegedly help a nation, which really only end back in the Donor countries’ banking system.
Bailout! : Exclamation made by those participating in mass youth emigration
Balanced Budget Multiplier: Random negative numbers.
Balanced Budget Multiplier: See Deflation
Balanced Budget: When there’s no economy left, income = expenditure ( = 0 )
Bank A failed device that continues to extract money after failing
Bank-Guarantee: A guarantee that every bank in the state is fubard
Bank; a device to extract money.
Bank: a virus capable of destroying all in its path. No known cure.
Banker: carrier of the Bank virus
Banker: person who gives you an umbrella when it is sunny,  and when its rainy beats you over the head with it.
Bayleoush: “Bailout”, just said in the dialect of english found commonly in Dublin 4.
Begrudgery (n): The most popular sport in Ireland. A bored game. Played everywhere. Team sport. All ages.
Belt Tightening: dual meaning, 1.citizen coping with
Belt Tightening: dual meaning, 1.citizen coping with , 2. politician eating a large subsidised meal
Belt Tightening: Where everyone wants to tighten their belt around Bertie Aherns’ neck.
Bernank: A unit of fiat money that starts with a value of 1 and ends with a value of zero in under 10 seconds
Bertie Bowling: to plan to create grandiose structure in false honour of self
Bertied : to have people come up and give you bags of money and houses, for no favors asked. Believed a mythical state
best person for the job: phrase used to describe a politician’s previously unemployable relative
BIG PHIL= i.e. doing a big phil, where aristocratic elites make sure no poor people live within 40 mile of their palaces.
Blight Club : see eurozone
Bond : An unbreakable alliance between a bank and the unknown
Bond Yield: Key indicator of economic health irrespective of ECB picking up tab for investors in event if default
Bondholder : synonym for fireproof.
Boucherfied : a medical process where testicles of a  jockey are transplanted to a bank CEO neck prior to a dail meeting
Brain Drain: Vacuum created by emigrating intelligent types, some of whom just like holidays. See quote ‘Mary Coughlan’
brown envelope: a valid no questions asked method of “payment”  to politician created by charlie haughey
Brownian motion: the movement of the eyebrows of an powerful tv presenter when presented w a Td talking shite
Budget : German payday!
Budget: The financing of an economy with the agreement of the German government.
Budgetary correction: Where you get to correct your budget so the government can maintain theirs.
Budgetary Stance ; being stood against a wall while an “Anglo” of money is demanded from you
Buiter: Grexit probability thrower.
Burden Sharing  well-catered meetings where eu leaders divide up the work of writing nonsense to deceive their voters
CAB: Body set up to recover assets from criminals not clever enough not to rob a country’s future
Capitalism: When it fails see Socialism
Capital Flight : what young dubliners are doing, mostly to Australia
Cardiff: to send away someone who’s turn it is to go regardless of fitness or desire to go “to cardiff someone”
Carbon Tax: A tax on carbon emissions, whereby the public are taxed per breath of exhalation of carbon dioxide.
Career Counsellor  – an optional role in schools , rarely needed more
CBI where our Government sends our €3.1BN of promises to go up in smoke
CBO: Religious Place
CDS: 1) Unregulated insurance products used to distort perceptions of risk 2) also see Ponzi scheme
Celebrity Economist: Anybody who has the audacity to suggest anything other than “concensus”. (see consensus below)
Central Bank of Ireland:  subsidiaryof Deutsche Bundesbank
Child Misfortune:  The new name for Child Benefit, as it probably won’t
Clusterfeck (n): A policy decision that causes havoc in every department. Can be direct or indirect. Always catastrophic.
Colemanificate ; to berate academics regardless of the issue at hand
Colemanising ; to use an economics column to opine that the economy would be better if we were more religious
Coleman,Doing a : using crisis as an excuse to blame the public sector for not giving him a job
Concensus: We’re doing it, so you’d just better get fucking used to it.
Confidence (2) that which if you are talking about you have not got viz Cabinet Ministers, football managers
Confidence Fairy: Fairy tale to promote trickle down economics
Confidence: see Irish for ‘philosopher’s stone’
Consequences: repercussion of law breaking or over indebtedness. Not applicable to politicians or CEOs
Cowenisation : to create a rolling omnishambles and the to retire and go to California to share your experiences…
Credit Crunch:The saw like motion, of the canine teeth of a banker, on a sandwich filled with imported prawns.
Crocodile tears. The faux outrage of union leaders at private sector non unionised job losses.
Croke Park Agreement : a win win result for Govt and Public Sector
Croke Park Agreement: A fictional story about productivity
Croke Park Agreement: An agreement where Bertie Ahern’s birthdays are held.
Croke Park: source of energy for ongoing recession.
Dail Eireann : lowest house of Bundestag with no power to do anything but listen passively
Debt Ceiling: See Blackmail
Debt Forgiveness: A confession box for bankers and politicians with a one way lock on outside. Not available in Ireland
December Budget (n): A very high, impenetrable wall that separates Irish people from a Christmas to look forward to.
Default ; what it is of the people who partied but not of the people who gave them the money.
Defaulter  a word which cannot be seen on the forehead of a modern Irishman due to his deeply tugged forelock
Democracy: [Error: File not found]
Dempsey , to know nothing, or something that definitely won’t happen
Devaluation  process by which currency finds real value. Alternative is to devalue the people .. see  Frankfurts Way
Diaspora : a term for a vast pool of potential suckers who can be tapped for money in return for SFA
dillusion: budget 2012 signals start of recovery
Disposable income (n): The imagined contents of an empty wallet. Aspirational.
domestic consumption : Ireland as the auld sow eating her farrow
Dropbox:The inside left pocket of a suit jacket, worn by an elected member
DSGE: sunk capital
Duberliner=official EU title for (former irish) citizens now living in the extended state of germany known as BERLIN.
ECB (v) to repeat the mistakes of the 1930s in a belief that the 2010s are really the 1920s
Economic Sovereignty: having the ability to chose who’s turn it is to rip off your country
Economic Sovereignty: having the ability to chose who’s turn it is to rip off your country
Economist: Artists masquerading as Scientists and earning income from public performance
Economist: Examiner of (backward looking) data, prescribing for future based on hunch. Or need to sell book
Economist: hurler on ditch. Either found in Ivory Tower, or maximising DOOM! in private sector to sell book.
EconoMist…where the department of finance is lost
Economists: Individuals who can explain what happened, argue about what is happening & haven’t a notion what will happen
EFSF …European Fraudsters Steal Freedom ……..
Election promise [v] A pledge of action given before a plebiscite which has no validity afterwards.
Emigrant: a one unit reduction in the live register
Emigration: The Governments policy for tackling unemployment figures.
Endacrinate: to express doubtless confidence in that which obviously does not exist. Ex: June 29, 2012 ‘deal’ for Ireland
Endapendence: (noun) a state of economic sovereignty under the “rule” of Enda Kenny.
Entertainment service: A measure by which a broadcaster fleeces the vulnerable of what little money they have
ESM: Giving stability to the poor wee bankers. At the cost of the citizens.
ESM: Poor man’s Political Union
ESM..(A welfare fund for banks) funded by citizens of Europe
ESM=extra special money (currency only available to elites of Europe).  aka Replacement for Swiss banking systems.
EU=strategy to dis-unite the people of Europe. NB: (More successful than the previous 2 world wars)
Euro Area Convergence: Euro Area Divergence
Euro Crisis : A chronic condition lasting a whole generation
EURO= the destruction of several countries prosperity.
Expansionary Fiscal Contraction : a myth
Expert Group; Government fudge to avoid decision making
Export led recovery: Export most of our people, thereby cutting unemployment and social welfare payments.
Exports: Irish people who have emigrated in order to find jobs.
Family Income Supplement= where Irish gov subsidises businesses but convinces the world its helping the citizens.
Feta  a type of Cheese which, according to Minister Noonan,  is as difficult to buy as  as an Irish politician
FFamnesia – An attempted rebranding of political party who oversaw events leading to loss of independence and sovereignty
Fianna Fail : not Fine Gael
Financial straitjacket: the Irish government’s recommended choice of overgarment for all of its citizens
Fine Gael : not Fianna Fail
Fiscal adjustment (n): Emptying the pockets of the taxpayer by rotating through 180 degrees. Permanently.
Fiscal compact; making austerity look good , see also “lipstick on a pig”
Fiscal Compact: See Race to the bottom.
Fiscal Prudence: Road to Ruin
Fiscal Responsibility: Where you get to be responsible for the irresponsibility of government and banking.
Fiscal Stability (n): A dream sequence in the land of clouds and cuckoos.
Flusterity (n): A meeting of two or more politicians (of any party) trying to make sense of it all.
Frankfurter= a powerful woman attempting to rid the universe of a Ireland, a great little country to do business in.
fraud: a word not applicable to politicians or bankers
full recourse  a family’s long-term fear of extortion and ruin, used by Irish banks as a form of capital
Fundamentals, the fundamentals are strong, a form of delusion that ignores the facts as they really are
Galway Tent: a location in which louche property deals and political sponsorship could be agreed to a country’s detriment
Ghost Estate: Beyond the pale void we have been staring at so long it begins to look back
Gilmorise: to hold strong views on social justice and equality and fail utterly to deliver
Global Race: Government policies must chase the goal of attracting hot criminal money from overseas territories
Going Forward  and  Turning a corner  the actions of a mule, or beast of burden, working at a grindstone
Going forward: Going backward, as fast as possible, towards the Famine.
Going forward: old hiberno-Irish. Extinct phrase replacing future for a short period C late 20th century.  b.1994 d.2008
Going forward: Term used to lull Irish people into the belief that strategic financial and economic planning was in place
Goldmansachs : a form of alchemy where everything can in fact be monetized.
Gordon Brown’s Golden Rule: Policy to achieve a lost decade
Government : This entry was deleted as it seemed to serve no function whatsoever.
Government Liquidity :   the Dail bar
Government: See Troika…
Granularity : Definition not found. NB. The lexicographers do not believe this to be a word.
Greece: Not a poster boy.
Green shoots of recovery: alternative definition: nettles.
Green shoots of recovery. ; favoured diet of unicorns.
Green Shoots; Mythical growth signs seen only by Government ministers
green shoots: early warning of a double/triple dip recession when sighting mentioned by gov press officers.
Green; Incompetent and hypocritical leadership, usually ‘wet behind the ears’, ALSO gullible followership…
Greenjersey: to urge a wholly unjustified belief on someone when all evidence points to the opposite
Growth : Fictional aspiration
Haranguing: What Troika did to Ireland and finance minister! And what
Hard Choices: Deciding which vulnerable people in society become impoverished to maintain your own salary and pension
Healy-Raed:The moment when you realise that a motorway in outer Mongolia surpasses the needs of disability care.
Heating , noun , archaic practice once widespread now only practiced by politicians, bankers and their families
Hit the bottom”, misdiagnosing a local minimum by looking at function values on a bounded interval
Hoganificate. To take something simple and make of it an omnishambles (sic) ; see also Cowenisation and bertify
Home Rule (n) stay at  home no money to go out
Hope. An extinct feeling.
Hospital bed: antiquated version of a trolley.
Household Charge (family home tax) a contribution from hardpressed families to pay Co Managers huge salaries
HSE (n,v, obscene) a curse or invectice  “you’ve made a right HSE of it”, “you have HSE’d that up rightly”
I think Bertie was more anxious to be on every “who’s who’s” social lists
Iceland: Magical place where we all wish we lived.
IMF: a multinational org that validates as infallible EU solutions which EU is working on replacing due to their failure
IMF: it’s mostly fiscal…
Incentive Economics: Policy to cut taxes for the rich.
Indacate : speech by an Irish leader which confuses more than it enlightens.
Instruments: Fiddles that politicians play a country burns
Interest: a tax levied on the poor by the rich
interest: the thing most ordinary people don’t have in economics
Ireland =a country on the periphery of europe that, home to many of the worlds greatest banking crooks &money launderers.
Ireland: 1. poster boy for Europe 2. deeply indebted island in European periphery.
Ireland: State of Purgatory.
Job Bridge: Fabled bridge to Jobland where the beneficent Creators give jobs to jobseekers.
Job Creighton (n): Lucinda Creighton’s “theory” how to create “millions of jobs”.
jobbridge : see slavery
Jobbridge: Exploiting the unemployed to profit wealthy corporations.
Joined up thinking : see Luas….
Joined-up Thinking: Thoughtless exercise in futile repetition of policies arrived at via faked consensus
Junior coalition party: lemmings
Kamikaze Politics : Becoming a Junior Coalition Party
Labour , noun, see Fine Gael
Labour Market Reform: Reduce Worker’s Wages
Labouring : a process whereby a political party becomes more and more like the greens…
Labours Way…. see “Frankfurts Way”
Laffer Curve (n): Where taxation levels are so high that the worker squeals hysterically following sight of their payslip
Large Scale Asset Purchases: Homeopathy
Lenihan (n): A snap decision, made under extreme duress and without rationale; ultimately catastrophic.
Liquidity trap : realizing your out of wine and no cash left
Lisbonising ; voting until you get it right
live register: list of people not on
Lost Decade(s): Self-inflicted pain
Lower Bound: Neat trick to turn the attention away from fiscal policy
Luxuries: Examples include water, clothing and toilet roll
Maastricht Treaty: A treaty to progressively remove powers from governments
Mandate: Where the people voted for sonething different, yet govt delude themselves into thinking they enjoy support.
Marian: radio programme where those immune from cuts discuss impact on others
Means: that which the poor have lived beyond, now marked for transfer to the rich
Media: See “Complicit”
Merkelled the realisation that although you are in some discomfort that you must smile.
Ming: to be neither pro life nor pro choice but pro turf
Monetary adjustment: Where you adjust your monies so that government employees wont have to adjust theirs.
Moral Hazard; the risk you run when electing amoral feckless clientilst politicians….
Morgankellificate: To be lambasted by politicians with suggestions of suicide for correctly predicting the bursting of the property bubble
Mortgage : see millstone
Mortgage : ways and means of enslaving generations of potential employees
Muppets:  collective noun for a group of Ireland’s bailoutnegotiators
NAMA: 2nd word in a song sung by muppets. As in ‘Me NAMA, nah… do do dee do do’
NAMA: Acronym, from Irish “Nil aon moola agam”, trans “I have no more money”,
National Interest : Common term to advance the interests of banks and the markets
Noonanificate : speak soothingly  in a calm grandfatherly fashion about how this hurts you more than it hurts them
Noonanpedia: a place where an explanation is sought but an inaccurate one is given
Not a Silver Bullet: Doesn’t kill werewolves. Absolves politicians of any responsibilty when stupid ideas don’t work.
Not a Silver Bullet: Doesn’t kill werewolves. Absolves politicians of any responsibilty when stupid ideas don’t work.
O’Dea-ious: to sport a moustache after the end of Movember
Panacea: The blindingly obvious solution that cant be enacted due to the wants of special interest groups.
Panacea: The blindingly obvious solution that could never be enacted due to the wants of various special interests.
Partied; activity engage in by everybody in Ireland
Partner: powerful person who mugs you and tells you what to do, by mutual consent.
Partnership: The process whereby the defenceless are extorted to reward the few.
Party (verb): Something all Irish citizens did c. mid 90’s-2008. Believed to cause economic catastrophes.
Pillar Bank : that to which you are tied to be scourged by the Troika
Pillar Banks created to give the illusion Ireland is back in business and lending to business
politician , noun, very highly paid public servant who blames all the ills of the country on lowly paid public servants
Poverty : the future
Pre budget submission: Autumnal sexual practice of Irish political mammalian genus. See 50 sheds of grey
prima facie (archaic): old legal term no longer in use…common usage has been replaced by ‘a file has been sent to …’
Private sector: moan
Prom Notes [n] A  charade whereby 3B of citizens money is destroyed every year at the behest of our “European Friends”
Promissory Note : an ongoing nightmare from which there seems no escape
Proneographic Star (noun): A public figure coached or moulded by Terry Prone.
Property ; root of all evil see also money (sic)
Public Interest Director : oxymoron
Public sector worker: person deemed culpable for all that is wrong in Ireland circa 2007-to date. See also, whipping boy
Public Sector: See scapegoat
Public services: Irish government euphamism for debt amassed by banks, bondholders and unsecured bondholders.
Quango {n} A body set up by Government to do it’s work which can be blamed when said work causes problems.
Quango: a place where Cllr’s go to die
Quantiative Easing. See Homeopathy.
Quantitative Pleasing : sending 3.1b of tax money to a central bank which then destroys it
Quantitive squeezing (v): Method of slow, steady strangulation of hapless taxpayers. Unrelenting. Can be fatal.
Rating Agency: Pied Piper, for rats… sorry, rates, for RATES
Rational Expecations: Perfect Foresight
Recapitalisation; putting monies into black holes of unknown size; an unknowable unknown
Recession – Opportunity for protected economists to whinge about everything while defending own exhorbitant salaries
red cent: a mystical unit of currency created by fine gael
red cent: a mystical unit of currency created by fine gael usage “not another red cent”
Refencing: Centrally pooling taxes originally intended for a specific purpose
Referendum [v] A plebiscite held wherein if it returns an unfavorable result to Government,may be held again.
Referendum: a question posed to the Irish people as many times as required until the correct answer is achieved
Reform: See Cuts
Renewal: The party  that caused austerity rebrands
Renters ; those who didn’t join in the property madness who now have to help pay to clean up the mess
Repayment. Only made by the little people on your behalf after your gambling goes wrong. Also known as a Win Win.
Reshamble: ‘Reform’   underperforming organisation simply by renaming it e.g. FAS/SOLAS
RTE: Reassure The Electorate
Seismic: (adj.) describing outcomes of little or no consequence (e.g., “seismic shift” in EU bank policy c.  Jun 2012).
Senate : political home for the vote impoverished, see also cronies and highly paid
SGP: Race to the bottom
Shankil or Dawson? RT @brianmlucey: Omahoney : 2 urge more bond diversification 4 non Irish & less diversificatn 4 Irish
Sidesizing: Redeploying staff when their quango is abolished as a ‘cost saving measure’
Sindo (v) to promote division and sow discord between elements of society while decrying division and discord.
Siptu: Shut it, Pay the Unions
sittin on d sidelines cribbin moanin is a lost opp in fact i dnt no how ppl like this(Morgan Kelly) dnt committ suicide
Smart Economy: A meaningless phrase thrown out by political sorts when they really don’t know what they are talking about
Social Perknership : where union leaders on 130k  and employers on more urge poorer paid to sacrifice
Social Porknership : where union leaders in exchange for a lack of criticism land jobs on state boards
Social welfare. : monies which could be used for promissory notes but somehow gets diverted
Socialist ; see Bertie
Soft landing: (a) Hard as hell landing.
soft-landing.(n.) sagging wooden floor between bedrooms (b/c of rising damp & lack of funds to heat house)
Solidarity: Where the people must support each other, because those in authority surely wont.
Sound fundamentals : term deployed when the economy is collapsing but you want to convey the opposite meaning
Sovereignty  state of self government attained for 61 yrs by Ireland mainly during late C20, prior to rule by the Troika
Sovereignty  the obligation to extort from your own people at the behest of a foreign power. Apparently.
Sovereignty: something lost
Special Advisor {v} The hiring of a friend at huge expense to taxpayers to tell you what  you were hired to do.
Special Advisors: Those who must be paid more than politicians, to justify the cuts to the poor made by politicians.
Special Case  1. A country which deserves a debt write-off (cf. Greece) 2. A country which deserves a debt (cf. Ireland)
Special Case : translation of Ihre mit einem Lachen paddy
Special Needs Assistant  – see  Career Counsellor
Spin Doctor: a MIB like individual or group who medicates a politician who has displayed tendencies to speak truthfully
Stability & Growth Pact: An accord to destabilize a group of advanced economies onto downward real GDP trajectory
stability treaty= EU secret code for elites. Generally words mean the complete opposite of what they are supposed to mean
Stability:: to Deteriorate Disintegrate Decay Degenerate…
Stammerspeak: language employed by Labour and Fine Gael when reminded of their ‘not one cent more’ pledges.
Standard and Poor: simplified social welfare recipient categories for 2013
Standing up to the banks – a governmental maxim, meaning “not standing up to the banks”
Structural Unemployment: Common term thrown to defend Austerity
Subsistence Level: The quantity of insoluable material within a Fianna Fáil think tank.
Subsistence Level: The quantity of insoluable material within a Fianna Fáil think tank.
Summit: A place European leaders meet to plan a race to the bottom
Systemic: Too complicated for all you simpletons to understand so just leave us to it
Tax Break: the point at which the poor are broke to pay for the banks
Tax: something the poor have to pay
The country stands on the edge of a economic precipice  but that said the Irish government are determined 2 move forward
The Dithering (noun): a daily event held by Irish politicians.
The Gathering (n): An assembly or meeting of people with the express purpose of proving Gabriel Byrne wrong.
The Markets: n, a semi-mythical set of beings that must be placated by sacrificing our futures to build ‘confidence’.
The Unemployed: the people you try to blame to take the focus away from the true causes.
Think Tank: Innovative Idea Generators for Deflation.
Trade deficit : the realization you can’t get a bloody plumber because they are all In a mine in western Australia…
Trickle down economics :the promise held out to the general public that if they are good Europe will piss on their heads
Troika. (v) to attempt to turn a group of people into Germans.
Troikaflage – submissive shrug by elected power re actual power, OR invisibility cloak,e.g.,”The Troika are NOT here”
Turning a corner (v.): Continuing at precisely the same angle around a perfectly circular circuit.
Turning a corner; process of endless downward spiraling
Turning the corner: Doing a u-turn.
Two Speed Recovery: Temporary recovery
UK: a place of absolution from ones debts for crooked bankers busted developers
Unemployment Rate: Irrelevant measure in the context of economic performance. See Bond Yield
Universal Social Charge: Form of income tax cloaked as Social Relief Fund. See also Banking Crisis Relief Fund
Unsecured: adjective which when applied to Irish bonds guarantees repayment
USC : When u need to get a portion of the wage that was previously in the tax free allowance part of it…
USC: Universal Social Charge introduced in Ireland in 2009 to pay for another USC (Unending Securing of Cowboys)
Varadkaboom (n): the sound made by the explosion of a massively destructive bomb which does not actually exist
Varadkarism: The act of denying the existence of further referendums on the basis that referendums are not democratic.
Vinburtonned – a process whereby a vuvuzela gets harangued and browned off
Wallaced: a state of perpetual dishevelment and tonsorial catastrophe
Washington Consesus: Recipe for lost decade(s)
Weidmanned: Loss of output by public policy
Zero: See Balanced Budget Multiplier
Zombie Bank: ghoulish unkillable horror creature that sucks the money from our childrens future

Green Jerseys, False Colours and the Irish Bond Market

There is a most interesting letter (of the Green jersey type) in the Irish Times this morning. It is from a Donal O’Mahony of Shankill and is on the wonderful performance of Irish government bonds. Ireland is truly lucky to have this sage, and also to have his namesake Donal O’Mahony the head of debt research at Davy stockbrokers (prime dealers in Irish debt). After all, they couldn’t be the same person, as who fly under false colours and not declare in a letter their interest and affiliation…. Anyhow, Shankill Donal states that we are addicted to “failure porn”,  in looking backwards, which tells me that the mindset that in the 1970s cut out of the biology syllabi the parts on the human reproductive system (durty filthy durty shameful durty stuff) still lives. Dont look back as then you might see stuff you dont like…

Anyhow Shankill Donal (not I guess to be confused with Davy Donal) says

” a stunning 88 per cent return in Irish government bonds since July, 2011 has gone largely unheeded by the Irish media, politicians and, most disturbingly, an insolvent Irish pensions fund industry . . . unheeded by all, perhaps, except those clear-headed international investors who see the improving creditworthiness that we ourselves discredit. “

okkkaay. Lets look at that.

First, and presumably because Shankill Donal is not Dawson Street Donal, he might not be aware of the (from my ivory tower view anyhow) significant debate on the bond performance. Shankill Donal must be a bond trader somewhere though as he focuses on the price of bonds, when most people focus on the interest rate on bonds. Shankill Donal and Davy Donal should get together and talk….Even a casual perusal of the interwebs will throw up dozens and dozens of articles on the irish bond market. But maybe Times Letters Page Donal doesnt use the intergoogler. anyhow, here is the most recent article I could find, to assuage him that yes, this ignorance is all in his mind.

Second, the underlying assumption is that the fall in yields is down to improved creditworthiness. Hmm.. Maybe he is a trader but he is no economist.  Bond investors care about creditworthiness only over the holding period. As nobody serious ever has to my knowledge suggested default on the actual NTMA issued government debt, as they were backed by the IMF and ECB for a period of years, as the strong likelihood is that some sort of (dont call it a bailout) deal will be in place from 2014 onwards, the strange thing is that irish bonds were ever so low (interest rates so high). Proof that he isnt really Dawson Street Donal is that he seems to think the fall in interest rates  / rally in bond prices is down to ourselves alone. Maybe hes a member of Sinn Fein? The fall in interest rates is of course down to a mild increase in risk appetite  a change in government from bumbling to fumbling, a realisation that the Euro is here to stay and the euro members seem willing to inflict and bear any pain to make that so, the continued efforts to stabilise the irish budget deficit, the apparent end (apart from clouds on mortgage debt and court cases on subbie toasting  to bank bailouts and a carry trade. The carry trade is of course the irish banks taking cheap ECB money and buying higher yielding irish debt. This has boosted the irish banks holdings of Govt debt to 10% or more, from 5% of a much smaller number in 2011. Victor Duggans blog on this is a must read. In essence, as Business Insider says s

“Simply put, Irish banks have dramatically increased their holdings of Irish government bonds, from a very low base.  This reflects the recapitalization efforts and tightens rather than loosens the linkages between the sovereign and domestic banks. The largely nationalized banks are funding a large share of the government’s deficit”

And those steely eyed wonderful international bond buyers that Shankill Donal loves? Well, theres one of em anyhow, Franklin Templeton, but that seems to be it. In fact, the NTMA said, and who can object

He welcomed the attention of US investor Michael Hasenstab’s Franklin Templeton Investments, which has become Ireland’s biggest private sector creditor over the past year-and-a-half by investing in bonds.Mr Corrigan said: “As an investor, Franklin Templeton are clearly very welcome in the positive view they have taken on the Irish market.”We would prefer if we had 10 Franklin Templetons, rather than one.”

In fact it seems that things might be the opposite of what Shankill Donal thinks. The NTMA very kindly publish a summary geographical holdings of Irish Bonds : the holdings of irish government bonds by non residents have FALLEN over teh last year, from 66b to 60b, from 78% to 74% of total. And this is with Franklin Templeton ploughing in. Dawson Davy Donal knows this of course, which is why he would never laud “clear-headed international investors” without caveat.

Finally of course there is the utter ignorance by Shankill Donal of diversification. No reputable or serious economist, such as Dawson Street Donal,  would urge increased home bias, or the use of domestic pension funds to purchase and buoy up government bonds (a form of financial repression). Irish pension funds should of course have some assets in all forms . And they havent done badly over the 2001-11 period – a survey showed a return per annum of 8.5%, well over the 6% global average. So whatever they are doing its not too bad.  Irish investors, including pension funds, need to be more, not less, diversified globally.

So, while its great that Shankill Donal is taking an interest and holding up a mirror to the facts, he should look up his namesake Dawson Street Dave and have a chat about whats really going on. Its not all bad news, but its not all good news, not by a long chalk….

Salary caps and chordates

My intereview on Morning Ireland on Friday (here as a podcast) has generated more emails and random stoppings in the street (every single on positive) than any other comment or public utterance I have made over the last 4 years. People are (barely) able to comprehend €500,000, the salary range now going rate for running a debt collection agency , sorry BANK, called IBRC (the unholy zombiestein that is the forced marriage of anglo and inbs). Indeed, it seems that 500k may not be enough – in what can only be described as a deliberate  attempt to enrage people further the Deartment of Finance have sanctioned a 500k plus salary for a chief risk officer for Anglo. Im sure the man in question is wonderful but as anglo is a glorified debt collection agency what it needs a highpowered CRO is a bit of a mystery. Anyhow this brings to 7 the number of people in Anglo who earn more than 500k. And this for a bank that exists only on the drip of interest earned on the wretched promissory notes. A nice little earner . But, I shouldnt pick on Anglo as it is apparently an easy target says its CEO (one of the 7 moral dwarves). It has gotten so bad that the FT, hardly a bastion of marxist rhetoric, has called shameful the salary issue in the broken, borked, bust, bankrupt (financially and morally) Irish banks

There is also the ongoing sore of bank pensions on which the Dail voted on wednesday. Its hard to take seriously any FF sanctimony on banks, but Mattie McGrath is a solid and coherent performer who at least now is saying sensible things.  He put a motion to the Dail  . The motion was all very mom and apple pie.

The following motion was moved by Deputy Mattie McGrath on Tuesday, 6 November 2012:

That Dáil Éireann: in view of the Government’s:

— exhortations to Irish citizens to embrace austerity;

— decision to raid ordinary citizens’ pension funds;

— threat to end tax relief on ordinary citizens’ pension contributions in the forthcoming budget; and

— recent changes to the qualifying conditions for the contributory state pension;

calls on the Government to end the current system of paying grossly over generous pensions and massive lump sums on retirement to office holders such as Cabinet Ministers, Taoisigh, TDs, Senators, senior public servants, State regulators including the Financial Regulator, members of the Judiciary and the CEOs of semi-State bodies and State-funded banks.

It was voted on and of course was defeated. Irish parliamentarians have their consciences and backbones removed on taking the whip, and never defy it.  Those that voted for and against can be found here : http://oireachtasdebates.oireachtas.ie/debates%20authoring/debateswebpack.nsf/takes/dail2012110700059?opendocument and their contact details should you be so minded here : http://www.oireachtas.ie/ViewDoc.asp?DocId=-1&CatID=138

We are in an emergency – a large part of governing is to do so with the active consent of the people. A gesture, such as a legislative cap of €250k in total package (wages, allowances and pension contributon) from the state would save very little money but it would salve anger, show that the L’Oreal brigade were not in fact immune, and would demonstrate solidarity. Will any government TD propose that? If it was proposed by an opposition member would any vote for it against the wishes of the government? Dont bet on it. That would require backbone, something found in Chordates. But not in TD’s..