Sterling’s weakness is Ireland’s gain

Apparently Ireland imports far more than it exports from the UK i.e. it runs a balance of payments deficit with the UK. A commenter (Yoganmahew, a longstanding contributor on financial matters to both and, highlighted this interesting fact over on Constantin Gurdgiev’s blog. He was discussing Ambrose Evans-Pritchard’s debt deflation article on the state of the Irish economy, discussed on Slugger here. In the same article Constantin, in a rebuttal of the Eurosceptic line taken by Ambrose, highlights some of the benefits of Euro membership – effectively arguing Ireland would be in a much worse state outside of the Euro.

While Sterling’s fall causes much grinding of teeth and wailing among exporters to the UK and retailers, it is – as shoppers making the weekly exodus to Newry know – beneficial for the rest of us.

  • al

    One wonders where exactly the southerners would be had they not the help of the EU gravy train.

    Been milking it for all it was worth for decades. The next couple of decades should be interesting for them when it’s time to start contributing back into the scheme.

    At least they positioned themselves strongly in the good years…oops.

  • Dave

    “Has Mr Evans-Pritchard ever seen John Hurley? or the dynamic trio of our Politbureauesque Leaders? Can anyone have confidence in their governance abilities? Being bootstrapped in the long run by the ECB does have a positive impact on our credibility and not having our currency managed by the corporatist consensus Government that we have at the very least insulates us from the monetary policies of disaster.” – Constantin Gurdgiev

    That isn’t a rebuttal to Ambrose Evans-Pritchard claim that the Irish Central Bank could have avoided the disastrous consequences of the ECB’s monetary policies in Ireland if it still had control over monetary policy. Gurdgiev has no valid counterargument because the claim is irrefutable. Instead, he makes ad honimen attacks on individuals, and declares that the Irish are not fit to govern themselves. If the objection to the calibre of the current governor, then that is an argument to replace the current governor, and not an argument to renounce sovereignty over monetary policy.

    It may well be, if the Central Bank had the sovereignty and not the ECB, that the members of the Irish Central Bank would have had a collective mental collapse – LSD in the Ballygowan – and confused themselves with a monetary union, thereby devising monetary policies that were designed to facilitate a multi-state monetary union – specifically, the German economy – rather than monetary policies that were designed to facilitate the Irish economy, and so devised the same set of monetary policies as the ECB devised, and, ergo, would have produced the same disastrous consequences in the Irish economy as the ECB produced, but it is more likely that the mental collapse resides with the person who is making this claim (a certain Russian gentleman).

    Gurdgiev’s deranged premise then is that Ireland’s external debt would have risen from 11 billion punts it was prior to joining the Eurozone to 1.67 trillion euros it has risen to after joining the Eurozone if it did not have access to the capital markets that came with membership of the Eurozone; if it financial sector was not subject to the regulatory framework that came with membership of the Eurozone, and if it was not subject to the arbitrary monetary policies that came with membership of the Eurozone. In other words, never mind that the Irish Central Bank managed the economy brilliantly, but pretend everything would have turned out the same even if the ECB didn’t manage it via the macroeconomic policy.

    I suppose, we should be grateful to the ECB that the Eurozone only increased our external debt to a mere 1.67 trillion from the 11 billion figure it was when the Irish Central Bank handed over the levers of control to it. What would it have to be before you could call it utterly disastrous monetary policies? A 3 trillion external debt? The ECB strapped a turbocharger onto the back of an already booming Irish economy and we’ll spend the next few decades undoing the damage of utterly inappropriate monetary policies. One size does not fit all.

    You also have this insidious perversion of democracy where the people, once they have renounced their democratic right to determine their own internal affairs, are encouraged to pretend that macroeconomic policies are an utter irrelevance to how the economy performs, so you have no debate about the role played by these policies and practices in Ireland’s economic collapse. The debate is censored because the people have renounced the right to determine their macroeconomic policies, and have therefore reduced any such debate to irrelevance and impotence. Likewise with the concept of democratic accountability: the agency that determines these affairs is not accountable to the nation for what effect they have on them, so the people are encouraged to simply ignore that agency. There is no debate at all in natonal life about the ECB. Instead, the nation is fed propaganda to the effect that the problems in the economy that have their root cause in membership of the Eurozone are actually problems caused by greedy property developers and greedy bankers that they, therefore, need not examine the role of the Eurozone to determine whether or not membership is in the national interest.

  • Dave


    We need to exit this political union, and stop pretending that all economies are the same so that Europhiles can further their political “ever closer union” agenda. Ireland is a textbook example of how people pay for these political agendas that masquerade as economic benefits with their livelihoods, and they pay a price to an agency that is totally unaccountable to them for how they exercise that power over them. If the Irish Central Bank fuck up, you can change the policy. If the ECB fuck up, there is absolutely nothing you can do to change it. And the ECB can only ever fuck up, since its policies are entirely arbitrary. You may as well pull your macroeconomic policies out of a hat, or expect to be cured by a doctor who pulls your diagnosis and course of treatment from one. Just as surely as he’ll kill his patient by that means, the Eurozone has killed the Irish economy.

  • Dave

    “One wonders where exactly the southerners would be had they not the help of the EU gravy train.” – al

    Never more than a tiny fraction of GDP, and 90% of all EU grants went to the farmers. Those grants harmed that industry rather than helped it, since it made them grant-dependent and left the farming industry in Ireland in a state where most of its land is now non-productive, adding bugger all to the national economy. The EU took five times the value in fishing stock from Irish territorial waters than Ireland ever received in grants from the EU, decimating the fishing industry just as surely as it decimated the farming industry. You, as an EU consumer, are the one who pays the higher food prices that are required to subsidise the EU’s largesse. There is no such thing as free money, kid. It’s just one giant bureaucracy that squanders your money. But look on the bright side: your tax money goes to pay for the careers of 170,000 EU bureacrats, so it creates employment, eh?

  • Greenflag

    Dave ,

    ‘Instead, the nation is fed propaganda to the effect that the problems in the economy that have their root cause in membership of the Eurozone etc ‘

    The ‘root cause’ of this particular economic crisis lies not with the EU but with greedy bankers and developers as well as negligent and blind governments originating in the USA since the early 1980’s and since then aided and abetted by neo conservative economics of the Friedman school . With the outsourcing of manufacturing somehow the stupid belief that an economy could be built on ‘financial services ‘ alone took root particularly in London & New York .
    Not only was there a lack of regulatory oversight but even that oversight which was in place was ignored . How else could the bureaucrats in the US -SEC or Fannie Mae or AIG or Lehman , Bear Stearns , Merril Lynch etc etc etc have been allowed to rip off the American ‘middle class’ ?

    When the German middle class was destroyed in the 1920’s/30’s as a result of ‘financial market chaos ‘ the Germans found an ‘honest ‘ demagogue (Noam Chomsky’s depiction of Hitler ) to put things ‘right’. Let’s hope that the Obama administration and the Germans , Brits , French , Japanese etc can avoid a world wide meltdown similar to the 1930’s .

    While I might personnally not be too upset to see the greediest of our bankers ,politicians and insurance executives swinging from lamposts via the popular justice of the mob – I’ve enough kop to realise that when the mobs take to the streets then it’s only a matter of time before the ‘innocent ‘ are hanged along with the guilty .

    What is absolutely appalling about this crisis is that the so called ‘responsible ‘ neo conservative pro free market shower have shown that they can no more be trusted to act and behave responsibly in business or politicis than can a 21 year old drug addict with a penchant for fast cars and even faster women be trusted to keep out of trouble .

  • Oiliféar

    “I suppose, we should be grateful to the ECB that the Eurozone only increased our external debt to a mere 1.67 trillion from the 11 billion figure it was …”

    Dave, Ireland’s debt-to-GDP radio has fallen steadily since joining the Euro ( I pointed this out in reply to one of your previous rants.

    (I also pointed out that Ireland’s “external debt” in fact fell to zero since joining the Euro. What you mean is Ireland’s national debt as a whole. See here:

    “That isn’t a rebuttal to Ambrose Evans-Pritchard claim … [Gurdgiev] makes ad honimen attacks on individuals, and declares that the Irish are not fit to govern themselves.”

    The specific section you’re referring to is a low point in the blog but did your eye’s not see the remainder of the blog, where Evans-Pritchards’ arguments are rebutted point by point? If they did then I don’t need to tell you that you don’t rebut Gurdgiev’s arguments.

    “… your tax money goes to pay for the careers of 170,000 EU bureacrats …”

    As has been pointed out to you before, the Open Europe numbers are wildly off reality. The actual number employed by the EU is 40,000. See here:

  • Mack

    Greenflag –

    I’m not convinced by the argument that conflates neo-conservativism with Milton Friedman, monetarism and free-market economics. Neo-conservatism is an imperial doctrine, and as practised by Bush and our bankers looks closer to corporatism than pure capitalism (I’m sure Friedman would be turning in his grave at the Bush administrations corporatist bail-outs!).

    Witness this from David McWilliams circa 2005

    irst, there is the right-wing ideological school, which contends that English-speaking countries drink from the same philosophical waters. This school contends that we share similar economic outlooks and have a fondness for tax-cutting, smallish governments, light regulation and the promotion of the entrepreneur.

    This view contends that, by the late 1980s, we had all enacted more or less similar Thatcherite policies, where the government pulled in its horns. The right-wingers contend that this put us in a good position to reap profits in the 1990s and the 2000s.This view looks plausible, and it makes neat, uncomplicated academic sense – the type of clarity beloved of right-wing ideologues � until we realise that there is an elephant in the corner.

    That elephant is the US which, since 2000, has been a textbook model of old-fashioned 1950sKeynesianism – the type of economics beloved of European social democrats. In the past five years, the US has borrowed to get out of recession. The federal government has spent money like a drunken sailor. This owes more to the economics of Roosevelt than to those of Reagan, and refutes the neat, all-encompassing right-wing view.

    While a lack of proper bank regulation caused huge problems, across the board. It’s an oversimplification to suggest it was simply a lack of regulation that was at fault. E.g. In the US and UK the regulators insisted that banks stress test using Value-at-Risk. VaR calculates the probability that a given loss will be exceeded on a particular day, but says absolutely nothing about the degree to which that loss could be exceeded. So using VaR, you may calculate a 5% chance of losses greater than 50 million and decide you can live with that, completely oblivious to the fact that if your portfolio blows up your losses may actually be 50 billion, or worse..

    And again – it was the regulators that insisted the banks use this deeply flawed measure of risk..

  • Greenflag

    Mack ,

    ‘I’m sure Friedman would be turning in his grave at the Bush administrations corporatist bail-outs!’.

    No doubt but then even Mrs Thatcher had reason to rebuke Mr Friedman’s suggestions for the British economy with the rejoinder that ‘this is Britain Mr Friedman and ‘pure ‘capitalism would not go down too well with our voters .

    Pure capitalism just like it’s ideological opposite i.e pure communism has never really existed nor will either ever exist . There has always been ‘state’ intervention whether via monarchs , dictators or democratic or totalitarian government- either to further strategic economic interests or to ensure preference and advantage for domestic producers . Historically there has never been any great private ‘fortune ‘ or accumulation of capital which has not been achieved without some ‘tweaking’ of what are commonly assumed to be the ethics of business morality. Once capital in the form of large corporations achieves a certain size it ‘becomes’ respectable and an upholder of the status quo which is in their interest . Or at least so we thought up to now :(?

    The ‘elephant in the corner ‘ in the present crisis is of the shadow banking ‘quantum’ variety . For the past several decades this sector has been spinning ever faster in several parts of the economic universe gathering an ever greater share of corporate profits for the ‘financial ‘ services sector . This has attracted ever greater capital flows into the financial services sector to the detriment of what’s now called the real economy . It also sucked in AIG and the ‘regulated’ banking sector across the world . During the seemingly prosperous years of the quantum spinning shadow elephant the ‘real ‘ economy of the developed world moved offshore as that was the only way this sector could compete for a share of corporate profits that would help restore it’s relative position to that of the financial services sector and increase market . penetration .

    Now with industry offshored and the financial services sector being decimated in the west what will be the ‘new ‘strategy for the anglophone powers to adopt to maintain their influence or economic standing in an increasingly non western world ?

    I agree re your point on regulators . Regulators and regulations make no sense unless the regulations make sense . The fact that the regulators missed out on the degree to which losses could be exceeded is a tribute to the powers of the shadow banking fraternity who ‘bamboozled ‘ everybody including the politicians , Reserve bank Chairmen , SEC Administrators and the investing public with their highly specialized ‘tools of financial destruction including the now notorious collective debt obligations – derivatives etc .

    McWilliams point is plausible enough and just underscores the extent to which all of the politicians be they of the right or left were ‘conned’ by Wall St . The alternative to Obama pouring more oil (i.e borrowed money) on the Bush economy pyre would of course have been to allow all the ‘bad ‘ capitalists to go to the wall and start again . This was an option which even the Bush administarion refused to consider – presumably the imminent election helped to focus republican minds wonderfully on the likely electoral fall out from a free fall depression back in August 2008.

    Bush’s reasons for supporting the bail outs will provide much research material for future students of ‘true ‘ capitalism .

    I have to think that Obama , Brown and other world leaders know that ‘keynesianism’ appears to be the only hope to avoid a worldwide political meltdown which could spark scarce resource wars and major political instability within the western democracies . While the USA , UK , France and Japan etc have all experienced economic recessions -NO western economy has ever had to cope with the pauperisation of the middle class as per the German Weimar Republic .

    When societies face collapse and elected politicians have lost all credibility and the corporate world appears corrupt and self serving then -totalitarianism of the right or left can provide an attractive sounding alternative to the newly impoverished millions and hopeless.

  • Mack

    Greenflag –
    Let’s pray it never comes to that then..