Intellectual mouth-pieces and the blurring of Reality
Writing in Saturday’s (22nd, May 2010) Irish Times.com , Prof Kelly, who originally predicted the economic crisis, said the open-ended guarantee of banks’ liabilities and the Nama bailout will leave the Republic with a “a worse ratio of debt to national income than the one that is sinking Greece” by 2012.
For too long the Irish people have been inundated with the wall to wall lies being pushed out by Government spin doctors and other intellectual mouth-pieces about the ‘financial crises in Ireland. These intellectual mouth-pieces are nothing more than begging dogs at their Fianna Fail masters table. Intellectual mouth-pieces who are untouched by the very financial crisis who’s reality they blur with their self serving statistics and tabloid pleasing sound bites.
In America those to the right have tried to suggest that Liberal Democrats held the banks at gun point until they handed over all their cash to the underclass and other undeserving sections of American society who could not wait to get into some real debt. The problem with this right wing theory is the fact that Congress was under the watchful eye of right wing Republican prudence at that time. The lie that the little people were the core cause and beneficiaries of multi-billion dollar fraud and corruption is easily exposed.
To understand Ireland’s financial crisis it is essential to look at the American model. The financial crisis that has dominated political and banking institutions around most of the industrialised world in recent years was and remains of Herculean proportions. When I say most of the industrialised world I mean that countries such as Canada were able to avoid the flaming pits of financial ruin. Canada was able to do a number of things right that both America and Ireland done real bad. Canada limited leverage, Canada protected consumers, and more importantly Canada ensured that unfettered capitalism and greed were not allowed to ride rough shot over the people. Canada unlike Ireland and America regulated the financial institutions rather than simply pay lip service to regulation.
Irish economists Gregory Connor, Thomas Flavin and Brian O ‘Kelly have taken some considered time to look at the realities that brought both the USA and Ireland to their financial knees. From the research of Connor, Flavin and O’Kelly it quickly becomes clear that many of the core causes of America’s financial crisis are not present in the Irish situation. Similarly many of the core causes of Ireland’s financial melt down are not found in the American situation.
After two years of listening to the Government’s spin doctors and intellectual mouth-pieces telling us that our financial crises was simply a mirror image of the American crisis we now establish that this is at best untrue. Ireland was driven into a real estate cul de sac by the Government, the banks and the property speculators. In many cases this triangulation is firmly joined, with even the Irish Prime Minister opening a property portfolio in Ireland and further a field. The mantra of the Fianna Fail government and their cheer leaders was to, “spend, spend, spend, buy, buy, buy”, just as British Prime Minister, Thatcher had done in the 1980s.
Young educated and hard working Irish people were lead into a financial cul de sac from which they would not be able to return. Property prices in Dublin out stripped property prices in many of the Major cities in America, this inflated property market was then meet with a banking crisis not before seen in Ireland. This banking crisis brought on by an inept Government and failed regulatory system of checks and balances. The Government blinded by its own self serving had become nothing more than a performing monkey to the cheap financial lending houses of main land Europe.
The Government now try to blame the ordinary people for the financial crisis, the very people who will for generations pay for this Government’s miserable failures and unending greed. The Irish Government constantly tell the people that they were elected to lead the country, yet they deny that leadership when their boom and bust policies are exposed to reasonable critique. Ireland’s financial crisis was not about ordinary people being greedy; it was not about big financial debt obligations, it was simply the tale of an inept Government being lead by its own self serving and excesses. The Government failed to regulate the finance institutions in a professional and transparent manner, it allowed unprecedented loans to be made to corrupt property speculators, it allowed banks to boost their own books by corrupt and criminal practices and now the same Government is to rob the Irish people once more in order to bail out their banking and property speculator pals.
Ireland had some things in common with the financial crash in America. The authors of the new report point to four main causal similarities.
1. In both countries property experts believed that while property prices were historically high, they would continue to rise. A case of wishful thinking rather than empirical evidence.
2. In both countries there was a wash of cheap money. America was a wash with cheap money from China and in Ireland, Germany and other Euro zone countries provided the cheap capital.
3. It was easy and made easy for big players to take big financial risks. Those who were in charge of the big financial houses knew well that they could do as they pleased. Directors could borrow tens of millions from their own banks without being held in check. Banks could transfer billions between each other to boost their accounts. Bankers knew that even if the shit hit the fan their multi-million Euro bonuses and pension packages would be safe. In America billions of dollars was paid to bankers for their ‘performance’ before their financial institutions went into liquidation.
4. The other main cause was inept Government and their failure to provide financial regulation. This failure was due mainly to what is today described as the relationship within the Golden Circle. This circle or triangulation of corrupt Politicians, Bankers and Property Speculators meant that the very people charged with regulating the financial system were the very worst offenders. A bit like putting the fox in charge of the hen house.
In America ideology played a major role in the direction of the economy, in Ireland this would not be the case. In Ireland it was more like a drunk winning the lottery. Ten years of unprecedented wealth in Ireland meant that the greedy got greedier, the haves had more and the have nots continued to have nothing. There was no trickle down economics in Ireland. While in America many politicians believed that ordinary people should own their own homes, politicians aspirations had little or no impact on the incentives offered by lenders. In Ireland the opposite was the case, the lending institutions became reckless as their loan books had government guarantees and first time home buyers and second property investors were woed with incentives and feel good Government encouragement.
While America ignored the lessons of Reaganism and Thatcherism, Ireland simply spent like a drunken sailor on home leave. Ireland was and remains absent of any Financial or political ideology, setting aside domestic sectarianism and historical nationalism. Ireland’s present economic philosophy of cut and burn fiscal rectifism is simply a longer journey up a similar cul de sac as the philosophy of boom and bust. Biffonian Economics can best describe the Irish Government’s present financial naval gazing. As the Irish Prime Minister, Brian Cowen (Biffo) buys time in order to take up a lucrative political posting in Brussels.
It is clear that the Irish Government were the architect of the present financial crisis in Ireland. It is clear that America had similar yet different financial road signs as it drove off into the economic abyss. It is clear from the lessons of both America and Ireland that the Regulators are every bit as important as the regulations. Limiting both leverage and securitisation helped Canada to keep its head above water, yet, if these measures are entrusted to people who are beholding to the wrong doers as was certainly the case in Ireland, then it is not enough. The regulators must have the civic will and statutory power to stand up to the politicians, the bankers and the corrupt speculators.
Consumers must be protected for they are the oil that drives the wheels of free enterprise, financial checks and balances must be over seen by an Independent, professional and able bodied watch dog. We can not return to a time in the not too distant past when those charged with regulation were nothing more than begging dogs at the table of the Golden Circle. We have failed to learn from the failures of Thatcherism and Reganism and if we do not deploy independent and prudent regulators armed with statutory instruments (similar to the Criminal Assets Bureau) we will continue to repeat the mistakes of the past and the present.
