Not so much looking down as across..

Sunday, November 14, 2010

Fighting for Irish Freedom

Last Sunday, just about this time, as we were enjoying the last few innocent hours of the weekend, little did we know that as we were preparing to sleep soundly, deep in the bowels of the Irish Times a truly shocking piece of economic analysis was being printed. The piece was written by Morgan Kelly, Professor of Economics at UCD Dublin and one of the very few economists in Ireland or indeed anywhere to have come out of the crisis with increased credibility. He correctly predicted the scope and scale of the property collapse in Ireland and shortly thereafter called the banking crisis equally correctly, unfortunately.

As we slept soundly in our beds this Apocalypse was hitting the printing presses. If we did not lose sleep last Sunday, we certainly did last Monday. While I agree with much of his analysis, I don't agree with all of his conclusions, many of which are political guesses and out of the reach of most mortal men. Professor Kelly makes the assumption that politicians may act like economists, and that is a big assumption. My guess is that the politicians are putting a brave face on the current chaos. They have no more a clue than we do, but they feel it would be uncaring to admit this in public. Modern finance, and indeed ancient finance, is built on confidence. Right now there is very little confidence, so when they tell you they what is going to happen in five years time they are mad or lying or both. Most politicians would do well to guess what might happen by Christmas. If a week is a long time in politics...

I do agree with Morgan Kelly. We are wtihin a few weeks of losing financial Independence. Morgan believes we have passed the tipping point. I don't. We can turn things round if....the Irish politicians can find a way of working together and seeing the awful budget of December passed. The opposition may think that by opposing the budget they will box cleverly. There will almost certainly be a new Government within six months although the composition is not likely to feature a Labour/Fine Gael coalition who cannot even agree the day of the week or time of day. But the new Government of whatever hue will be but the sub office of the IMF and the European Central Bank.

Many in Ireland are so close to capitulation that they are suggesting this might even be a qualified 'good idea'. Having the IMF in your sitting room is like your parents dying and being brought up by well meaning but stern foster parents who have every chance of killing the child in an attempt to make him better.

International financial intervention is a recent science and is where medicine was about two hundred years ago when the received wisdom was to blood let - to purify the body of impurities by bleeding the patient almost to death. I do not welcome the advent of the IMF, not because they are bad but because they are mad.

When I went to school in the simple monochromatic fifties and sixties in Dublin, all of Irish history was depicted as an eight hundred year struggle to gain independcne from the British. This often flawed and simplistic account at least saw the benefits of British culture, our roads, railways, towns, literature, music and so on.

What will the IMF bring to Ireland?
Answers on a post card.

We have to regain the upper hand.
We have to be in a position where de don't need to go back to the bond market for two or three years.
Banking has always been that impossible science of lending only to people who really don't need it. We need to show that we don't need to borrow.
Like a spendthrift husband we need to cut our expenditure to match our income and live with the consequences.
Then we will have economic freedom and pride. The consequence may be that we cannot pay back some loans ontime as previously expected - but these can be renegotiated.
You know the story - it is very difficult to get a new loan from the Bank Manager when your track record is lousy, it is much easier to hold the loan you have and send a note of apology. What you have, you hold. Possession is, after all, nine points of the law.

We shall see.

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