Modern life is fragile

Fintan O’Toole – The chance of six specific Irish horses winning at Cheltenham on the same day last week was 1.5 million to one. But it happened. Or.. The probability of the results of the Euro 2012 qualifiers being exactly as they will turn out to be is extremely low. But it will happen. Or.. If you had correctly put an accumulator on this years election results being exactly as they were (seat by seat), you’d have made a fortune. … Read more

Ireland and default again

Yves Smith has a thought provoking article on her Naked Capitalism blog that I’ve only just got around to reading. It includes a useful, if cyncial, analysis of the raison d’être of the current stress tests / banking investigation being undertaken by BlackRock. Earth to base, this is a garbage in, garbage out exercise You can’t value loans against illiquid real estate by sitting around playing with models. Our Swedish Lex, who worked on the Swedish bad debt liquidation exercise, … Read more

Not sure how to vote next Friday? They’ve got an app for that…

Votomatic quizes you on a range of policy choices and then scores the parties for compatibility with your views. Give it a try My scores – FG 19, Lab 10, Greens 2, SF 1, FF -3 MackNo bio, some books worth reading – The Rational Optimist: How Prosperity Evolves – Matt Ridley . Crisis Economics: A Crash Course in the Future of Finance -Nouriel Roubini, Stephen Mihm

“We are in some pickle now”

Vincent Browne tracks the history of Ireland’s banking crisis in yesterday’s Sunday Business Post, ending with what must be the biggest understatement of the new millennium (see title). He argues that the EU will not countenance a restructuring / default of debts run up Ireland’s banks. But getting rid of some or all Of the bank debt will not be a runner in the EU, according to a source that knows. And disowning it all would cause massive problems, not … Read more

Breaking news: Belfast plane crashes at Cork airport

An RTE news story indicates that they have unconfirmed reports of 8 fatalities after a plane from Belfast crashed at Cork airport. Update – six confirmed fatalities, six people injured. From the report The Manx2 commuter flight, with 10 passengers and two crew, was en route from Belfast when it crashed in heavy fog at Cork Airport just before 10am. The Aviation Authority says the aircraft made two attempts to land before crashing. Witnesses report hearing a loud bang. The … Read more

Eastern promises

It would appear that our Asian friends have confidence (and an interest) in the survival of the European project. Japan and China will help fund the European Financial Stability Fund that will be used to bailout European banks,  sorry,  I mean Ireland. With Japan pledging to buy 20% or more of the bonds that will be sold later this month. From Bloomberg – There is a plan for the euro zone to jointly issue a large amount of bonds late … Read more

The European view on insolvency

The new proposed European Stability Mechanism looks like it will come into force via a change to The Lisbon Treaty, and will avoid facing public vote by referendum. It provides a process for sharing losses with sovereign creditors in the case of national insolvency. (More details on that below). In yesterday’s FT, Lorenzo Bini Smaghi, an executive at the ECB, made the case against sovereign debt restructuring in the Eurozone. He argues that government debt is a central plank of … Read more

Ireland can’t afford to bail out European banks

I think this point is worth highlighting more clearly. Below – Simon Johnson ex-CEO of the IMF – on who is owed money by the Irish banks German banks are owed $139 billion, which is 4.2 percent of German G.D.P. British banks are owed $131 billion, or about 5 percent of Britain’s G.D.P. French banks are owed $43.5 billion, which is approaching 2 percent of French G.D.P. But the eye-catching numbers are for Belgium, which is owed $29 billion – … Read more

Euro Crisis : History repeats

The Guardian report that – the Portuguese prime minister José Sócrates insists Portugal is under no pressue from EU states to accept a euro bailout. Meanwhile After Financial Times Deutschland reported eurozone nations and the European Central Bank were urging Portugal to follow Ireland and capitulate to financial aid, the office of the Portuguese prime minister José Sócrates said it was “totally false” that the country was under such pressure. So the politicians deny any contact while financial journalists say … Read more

Europe gets serious. May double the EFSF, may burn bank senior bond holders

The Wall Street Journal are speculating that the size of the EFSF may double to almost €1trn, if German opposition can be overcome. This is an effort to assure markets that Europe can bail out Spain if neccessary. Doubling the EFSF’s capacity to €880 billion would remove any doubt about whether the facility has enough firepower to prop up Spain’s government. Such an expansion would require a bigger financial commitment from Germany, where many lawmakers and voters are skeptical about … Read more

Il sorpasso

Due to below par second qaurter Japanese GDP growth, China has overtaken Japan to become the worlds second largest economy. Bloomberg report China surpassed Japan as the world’s second-largest economy last quarter, capping the nation’s three- decade rise from Communist isolation to emerging superpower. Japan’s nominal gross domestic product for the second quarter totaled $1.288 trillion, less than China’s $1.337 trillion, the Japanese Cabinet Office said today. Japan remained bigger in the first half of 2010, the government agency said. … Read more

The coming collapse of the Irish middle class

In the her excellent lecture on “The coming collapse of the American Middle Class”, Harvard professor Elizabeth Warren investigates the stagnation in real median wages in the United States since 1970, and highlights the massive amount of extra-risk assumed by families in moving from one to two income households (The Two Income Trap). It’s probably worth noting at this point that Warren employs a more expansive notion of middle class than many (although not all) in Ireland. Large swathes of … Read more

Quis custodiet ipsos custodes (after they retire)?

Nassim Taleb has a thought provoking blog on the subject of gamekeepers turned poachers at the Huffington Post. Specifically he deals with regulators who use their in-depth knowledge of government regulations to secure extremely well paid employment, helping firms sail as close to the regulatory wind as possible, upon leaving public service. At Davos last year, Taleb was approached by Alan Blinder, a former Vice Chairman of the Federal Reserve Bank, who attempted to sell him a financial product that … Read more

Why Ireland can’t borrow to stimulate

Karl Whelan explains why a Keynesian stimulus package isn’t feasible for Ireland in a blog post at Irish Economy – By the way, it gives me no joy whatsoever to write this. I would love to be in a position to recommend fiscal stimulus. The vast majority of us dismal mainstream economists believe that fiscal policy should be counter-cyclical, so that deficits are run up during recessions and run down during expansions. We would love to be recommending stimulus programs. … Read more

US Ratings Agencies : Um.. please don’t use our ratings

So, just as Ireland get’s downgraded by Moody’s, the Financial Reform Bill in the USA throws a spanner in the works, potentially making the agencies liable for inaccurate ratings. Their response – ‘stop using them please’. From the Wall Street Journal (via Naked Capitalism) The nation’s three dominant credit-ratings providers have made an urgent new request of their clients: Please don’t use our credit ratings. The odd plea is emerging as the first consequence of the financial overhaul that is … Read more

After the storm

The Croke Park deal should ensure that Irish public sector workers are spared any further pay cuts. Perhaps worth reflecting, after a painful couple of years, that according to the OECD, Irish state workers are still among the best rewarded in the world. The Sunday Business Post report on a survey by Forfas and the National Competitiveness Council. The figures for 2010 show that Irish nurses are paid the fourth-highest average salary ($67,000) in the OECD. The starting salary for … Read more

Dublin : What a difference 30 years makes!

If you are depressed by the economy today, Damian Corless’ look back at life in the Irish capital 30 years ago should cheer you up no end. If the past is a different country, Dublin in the summer of 1980 was Gaza with added rock festivals. There was nothing romantic about the foul smell wafting through the city streets from the Liffey. Despite a £25m war chest to fix the problem, factories upstream continued to spew out gloopy effluents that … Read more

Global Crisis: Write-off or inflate debt away says Steve Keen

Aussie economist Steve Keen, host of the excellent Debt Deflation blog, has long argued that our current – record high – debt-to-gdp ratios are the real cause of the crisis. As the debt is still there, the crisis is still here. He offers a realistic assessment of our options – Having got ourselves into a debt-induced economic crisis, the only permanent way out is to reduce the debt–either directly by abolishing large slabs of it, or indirectly by inflating it … Read more

Recovery in action? As Intel post best ever quarterly results

Businesses are upgrading their IT infrastructure, Intel reported monster Q2 earnings yesterday – the best in it’s 42 year history. From Daily Finance Technology bellwether Intel (INTC) blew past Wall Street expectations Tuesday, reporting the best quarter in its 42-year history on strong corporate IT demand. The chip giant’s results give investors a cause for optimism heading into the third quarter. The powerful performance by the world’s largest microchip maker offers further evidence that consumers and companies continue to increase … Read more