Ireland should be leading; not following the herd

Ireland has been following the US over the cliff of economic collapse for way too long. It's time the Irish considered a new role model for economic development and growth. Ummmm...the word 'China' comes to mind - but I am sure this strategy has not yet reached the halls of Irish academia or government. What a shame! Ireland should be leading now with innovative thinking rather than following the savage capitalist herd over the economic cliff. Ahem....time to wake up the Irish people and demand a better way to prosperity for all.

Depressionary bust in Ireland is echoed in California

Posted by Edward Harrison on 18 July 2009 at 9:16 pm

For quite some time now I have been of the view that there are a number of striking similarities between the goings on in Ireland and those in California, none of them good. Both locations have seen extraordinary rises in home prices turn to massive busts. As a result, both locales have seen depression-like collapses in consumer demand and the local economy. Unemployment and government deficits are surging in both California and Ireland. But, both California and Ireland have zero control over monetary policy and this is the crucial connection.

Ireland

Let’s rewind a bit to 1999 when the Euro came into being. Ireland was a founding member of Euroland. So, on January 1st of that year, the Irish fixed their currency the Punt to the Euro for good at a rate of 0.7876. From that time forward, Ireland effectively had no control of the monetary spigot. By 2002, Punts ceased to exist as money in Ireland and the Euro was ushered in.

What this change meant for Ireland is that it had the many benefits that go with being part of a large single currency market. Among the many advantages of a single currency are reduced foreign exchange costs, less currency volatility, less chance of a run on the currency, and a greater certainty in business planning that results from those benefits. And these benefits can be huge in times of crisis – just ask Iceland.

There is a problem though which I mentioned before, namely the Irish have no control over their own money. To be sure, hard money types probably see this as a good thing as it prevents countries inflating to get out of an economic pickle. But, the alternative for the Irish has been depression.

Back in February, I mentioned this problem in a post called “The European Problem.”

The Eurozone members have decided to forgo independent monetary policies. Individual member nations have free capital movement and a fixed exchange rate but zero control over monetary policy. That rests with the European Central Bank (ECB) in Frankfurt.

The problems mount in recession. Some members are getting devastated. Spain, for instance, is in depression already with unemployment at 14%. Ireland’s national budget is imploding with estimates for deficit reaching 10-12% of GDP. If you are Spain or Greece, you would like to print money– a lot of it. But that’s not happening in the Eurozone yet.

The result is a potential national bankruptcy for the likes of Ireland, one reason their credit rating is suffering. Will Ireland go bankrupt? Perhaps. It is unclear how willing other Eurozone members would be to support the country were it to run into that kind of difficulty. The Germans are furious for having abandoned the Deutsche Mark for the Euro, which they see as a ‘weak’ currency. Bailing out a Eurozone member would come with many strings attached.

Then, there is the case of Austria. They too are in the Eurozone. They have a weak banking system because of excessive lending to Eastern Europe — reaching a full 85% of Austrian GDP. (Whether the Austrians were mentally re-creating their lost Empire, stripped after World War I, is a case for the Austrian psychologist Freud). If the Eastern Europeans run into problems, Austrian banks will fail en masse, requiring help from other Eurozone members (read France and Germany).

So, Ireland, having no other choice, must cut spending…drastically. Ambrose Evans-Pritchard reports.

Events have already forced Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap.

A further 17,000 state jobs must go (equal to 1.25m in the US), though unemployment is already 12pc and heading for 16pc next year.

Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. “The attacks outlined in this report would represent an education disaster and light a short fuse on a social timebomb”, said the Teachers Union of Ireland.

Nobody is spared. Social welfare payments must be cut 5pc, child benefit by 20pc. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc.

California

I hope this sounds familiar to American readers because this is exactly the scenario faced by California. The state does not have the option of going out to the California Federal Reserve Board’s backyard to pick a few ten billion dollar notes off the money tree. This is a privilege reserved for the U.S. Federal Government, one I would add that has the Chinese worried. Effectively, California is to Ireland as the United States is to the Eurozone. And that spells depression for California. Here are a few headlines:

• California prepares to shut 220 state parks to make up budget shortfall
• California’s Crisis Hits Its Prized Universities
• California closes state offices to save cash

Welcome to Reykjavik on the Pacific. Don’t think this train wreck happened overnight. It has been building for months. I first asked in October of 2008 is the State of California bankrupt. Technically, they are not. But, when a state refuses to honor its bills by handing out IOUs, that’s bankruptcy to me.

It is going to get worse for California. That is for sure. The problem here again is the depressionary bust that is likely to take hold as California starts firing workers and cutting spending. Remember, people with no jobs have little income. And having little income means foreclosure, which also means a surge in housing inventory and falling prices. That’s a recipe for still more foreclosures, continued house prices declines and a deflationary spiral. I imagine Wells Fargo and Bank of America would be rendered insolvent by such a scenario. So why is Obama balking at lending a helping hand?

I anticipated a bust in California and a helping hand from the Obama Administration, because I figured they wanted to mitigate worst-case outcomes. As far back as January 2nd, I was already saying this was the likely scenario. I asked “Will federal largesse be countered by state and local cutbacks?”

There has been a general outcry for economic stimulus on the part of the North American, U.K. and Eurozone federal governments to counteract the fall in private sector consumption. In the U.S. and the U.K. in particular, this message is being heard and largesse will be delivered in spades.

But, in the United States, there is a bit of a problem: state and local governments. They will not, and often cannot, spend. In fact some will be cutting. Will local government budget cuts undercut federal fiscal stimulus?

Yes. Yes. Yes. Doesn’t the Obama administration see this? I would argue they did not understand this in January or the stimulus bill would have been larger and more front-loaded. But, perhaps they do now, but have chosen not to act because every state and municipality in America would be looking for a handout if they did try to act in California. So, we’re in bit of a pickle here.

Conclusion

The foregoing analysis can’t leave you feeling like recovery is imminent in Europe or in America. Certainly, it is not in Ireland or California. The problem is the Impossible Trinity of a fixed exchange rate, independent monetary policy and free movement of capital. You cannot have all three. And California and Ireland both lack the monetary escape hatch. Depression will set in.

I see only three choices to solve this problem.

1. Bailouts: Of course, we are going to see requests for transfer payments here. Will Obama bite? Will the Germans block this, afraid that the Austrians and Spanish would be next? Obviously, transfer payments are part and parcel of a monetary union in order to achieve economic harmonization. In the U.S., California gets less in federal largesse than it pays in taxes. This is a fact. However, it is looking ever less likely that this fact will help Schwarzenegger receive the help he wants.
2. Backdoor currency: Marshall Auerback has argued that the IOUs in California are a backdoor currency system. No, they are not legal tender. But, in a note to me, he said “California can turn its warrants into sovereign currency by agreeing to accept them in payments to the state. Note that I AM NOT arguing that California should make them “legal tender, payable for all debts public and private”—this is something it cannot do. But you could basically reduce the cost of CA’s borrowing substantially via this device and essentially reduce the need for muni bond issuance. In fact, the implication that flows from my analysis is that you’d want to buy every single muni bond in sight as the IOU, by giving it an intrinsic value to pay state tax, effectively eliminates the need for muni bond issuance.” Could Ireland do the same?
3. Immigration: People are just going to have to move. As jobs disappear in Ireland and California, the Irish and Californians will need to emigrate elsewhere. They have a huge market to chose from in both cases.

None of these are great options. I wish I had something more uplifting to say here. But, that is the situation we face.

Related Reading:

The Return of Depression EconomicsI

Frommer's Ireland 2009 (Frommer's Complete)

The Return of Depression Economics and the Crisis of 2008

Confronting Southern Poverty in the Great Depression: The Report on Economic Conditions of the South with Related Documents (The Bedford Series in History and Culture)

The Economics of the Great Depression: A Twenty-First Century Look Back at the Economics of the Interwar Era

18 trends I find disturbing

Focussing on specific issues in depth, is, by and large, a good thing. However, noticing the long term patterns repeat themselves time and again in many spheres is critical to seeing the bigger picture.

Like a jigsaw puzzle, we must examine each piece of news and reality to see how it fits with other bits: but, unless we stand back and see the emerging picture of ALL the interlocked clues, we will be lost in minuitae and miss the direction in which we are travelling en masse.

I am not going to bother to 'prove' any of these trends; they are just my observations. If readers of this blog are interested in one or more of the trends below, leave a comment and I will do my best to address questions raised in a future blog with examples.

1. The increasing number of 'law and order' television shows over the last 20 years has desensitised people to the abuse of civil rights, justified by 'getting the bad guys'.
2. The television shows which exalt technology which invades our privacy, has created a culture where nothing is sacred or private if it can be used by government agencies to 'get the bad guy' (they will tell you who that is through media).
3. Destruction of free media has allowed those in power to construct a false universe which serves their purposes of controlling the masses.
4. Terrifying people with bogeymen keeps them from finding the curiosity and confidence to seek balanced information.
5. Democracy has become an inoperable ideal, used to provide people with the illusion that they are in control of their destiny.
6. Technology is enabling a new world order, in which every moment of our existences is monitored and controlled by government.
7. Labels which divide people, keep them busy fighing each other while others control world events behind the scenes.
8. Food and water, housing and healthcare are going to be the scarce resources of the future.
9. Corporations are morphing into global institutions which are not accountable to any government or people whose lives they control.
10. The 'rational' systemic paradigm of socio-economic progress trumps 'compassion and integrity' everywhere.
11. The people of the West are terrified by the specter of 'relative deprivation'; and willing to do almost anything to continue indulging in lifestyles the resources of the planet cannot sustain.
12. Overpopulation is upon us: there will be a cull - whether natural or manmade.
13. Most people would rather be right, than learn something which challenges their security.
14. Those in the most dire poverty and areas of imperial violence, are alone.
15. Banal discussions of irrelevant issues presented to us by the media occupy the majority of our time.
16. Our mileau rests on arrogance, as though tradegy could not affect such an advanced civilisation as ours. (No historical context)
17. The laws enacted by politicians which erode human rights are ignored by a panicked populace (see # 15).
18. The ignorant have become arrogant: everyone thinks they are right from their own point of view.

My conclusion is that we are doomed if we do not begin to figure out the context in which our lives are occurring. Divided we fall.

The Scorpian of Corporate Capitalism

This article will be difficult to read if one is from the United States mainstream culture. Perhaps it has too much truth for those whom it describes. The rest of the world will mostly agree with most of this poet's description of the system which destroys even those who would not read his poem. My own experiences verify the impressions of this poet for the vast majority of those I meet on the net from the States, but certainly not all.

The Frog and the Scorpian

Image by TinyPic

By Vi Ransel
2/14/09
Souce
A frog and a scorpion met on a stream bank. The scorpion asked the frog to carry him across on its back. The frog asked, “How do I know you won’t sting me?” “Because if I do, I’ll drown, too” answered the scorpion. So they set out across the stream. Halfway across, the scorpion stung the frog. As the frog started to sink, he knew they’d both die. With his last breath, he gasped to the scorpion, “Why?!” “It is my nature. And you knew I was a scorpion.”

Americans do not want the facts.
They do not want to hear how many countries
we’ve invaded for power and money
nor the number of proxy wars
financed in our name for the same.

Americans do not want to talk
about slavery, the Native Americans
or our rape of “Third World” nations
for necessities like bananas or coltan for cell phones
via the IMF, the World Bank and “free” trade.

Americans do not want to see
that compliant puppet governments
and dictators are America’s best friend,
that anywhere real democracy rears its unwelcome head
it’s put down by demonizing it and its leaders and/or killing them.
(See Mossadegh, Hamas, Allende and Hugo Chavez .)

Americans do not want to admit
that terrorism is not caused by hatred
or envy of our “freedoms”, but by our invasions,
torture, exploitation and slaughter,
or that the US sends three billion taxpayer dollars
to Israel yearly to test white phosphorus,
J-DAMS, DIMES and GBU-39s
on the captive population of Gaza.

Americans will not even try
to understand that depressions and recessions,
repetitive bubbles and Wall Street’s speculative gambling
are planned in advance by the shameless fat cats
of the plutocracy and the “Federal” banksters.

Americans will not entertain the idea
that American business uses human shields it calls “illegals”
to stave of the threat of paying a living wage
and if they ask for one the boss just calls la migra.

Americans do not want to know
that Main Street was murdered by Wal-Mart and Wall Street,
or that prisons are plantations where the process of manufacturing
is just business carried on by other means.

Americans do not want to hear
that health insurance is a middle man
designed to bleed them into medical bankruptcy,
or that credit is just debt with a fancy name
created to rob them of their homes and their property.

Americans do not want to believe
that plastic is strangling the ocean,
that petro-agriculture is poisoning their food,
that the rain forest’s been razed for cheeseburgers,
and that climate change, misnamed “global warming”,
warms the “heart” of Big Energy’s shareholders.

Americans do not want to be reminded
of the animal holocaust in “farms” that are factories,
which in addition to terror and agony
causes stroke, heart disease and obesity,
or that the runoff makes drinking water a toxic cocktail
of hormones, antibiotics and feces,
that most of the ocean’s big fish have been fished
and commercial trawlers scrape the ocean bottom lifeless,
that continual solitary driving of their personal vehicles
helps strand polar bears on the remnants of ice flows.

Americans don’t want to look at the fact
that sex, fear and envy persuade them
to buy products that kill them for profit -
alcohol, tobacco, meat and dairy, food additives,
prescription drugs, corn syrup and plastics.

Americans do not want to admit
that love, family, friendship and sexuality
are now no more than profitable commodities,
that wars, sports, TV, shopping and celebrities
are designed to keep their minds off the rape of democracy.
Americans cannot be bothered to discover the political priorities
of people they vote for in the electoral extravaganza,
to look for alternative info though newspapers, TV “news” and talk radio
are talking points and sheer propaganda,
or to acknowledge that the people who “represent” them
have not the people’s, but their own, interest in mind,
due to campaign funding’s lucrative bonanza.

Americans refuse to see
that schools don’t educate for a reason.
An educated public is 300 million dangerous threats
and schools are used to defuse these

by a pre-emptive indoctrination of children
with the wisdom of dog-eat-dog competition
which creates the divide-and-conquer infrastructure
that allows oppressors to blame their own victims.

And since kids might stumble into cooperation and empathy,
those in social programs are deemed weak and pathetic
in an effort to get the victims to agree and accept
that they’re the primary cause of the system’s effect.

The plutocracy exercises increasing dominion
via consolidation of capital at the people’s expense
concentrates it periodically, ratcheting up its intensity,
during engineered crises like wars and depressions.

The United States is no longer the home of the free and the brave
where life, liberty and happiness are pursued,
but of people living in fear of financial and physical terrorism
and co-opted by the carnival of consumerism.

It’s a cauldron of inequality, poverty and misery
where lives are lived in quiet desperation,
in free(dom of) speech zones and the pursuit of stuff
in a marked down and militarized nation.

Americans refuse to believe that they’ve accepted to live
under a system that subjugates, denigrates and infantilizes them,
and that the many creating the wealth at the bottom
are engineered as ignorant, obedient and defensive.

And as the money is funneled up to the few
the many are bought off with shiny oil-based objects -
I-pods, X boxes, PCs, plasma TVs, SUVs,
McMansions, Mickey D’s, boob jobs and botox -

strung on a charm bracelet/slave chain
of the non-negotiable American lifestyle
constructed on the ashes our foreign trade policies
have made of other people’s rights and their lives.

Americans seem not to notice
that nature has been reduced from The Source
to a package of exploitable resources,
and that citizens are relegated to being consumers
who, in turn, are eaten up by their choices

or that a not-so-invisible hand signs the legislation
that makes foreign and domestic American policy
and turns what started as participatory democracy
into a Donner Party version of economics.

Americans don’t want
to hear, to see, to speak, or to feel
anything
about what’s actually happening to them
or being done in their name,
but most of all they don’t want to
THINK
because thinking leads to
cognitive dissonance and confronting the pain
of knowing how the American lifestyle
is, and has been, maintained.

But the aversion therapy administered in schools
and cultural reinforcement thereafter
keeps them safely away from
the truth,
imprisoned like dogs
with electronic shock collars.

And besides, they’re so busy with their shopping,
which is Americans’ ultimate function,
that they don’t have the time to tune into
what that “little voice” has been trying to tell them

that this system relentlessly perpetuates itself
by means of infinite, unlimited growth,
which it carries on by any means necessary
like a parasite that strangles its host.

It has to kill the goose (that’s us)
who lays the Gross Domestic Product Golden Egg
because it’s a no-holds-barred, winner-take-all,
every man on his own for himself free-for-all
until there are no eggs left to take.

It’s not ’til they’re drowning in hubris and debt
and the system turns around and stings them
that Americans are willing to hear what they already knew -
the scorpion is corporate capitalism.

Vi Ransel is an anti-capitalist poet of exceptional caliber.

The world in 2035

I wish I could say the following article is the Sci-fi plot of a new novel: it is not. The future as envisioned by the Ministry of Defence below is highly probable. Much supporting evidence is listed under 'Related' at the end of the article for those who like research.

The question which begs to be asked is this: What sort of earth could we have created if we hadn't spent most of our money on War technology and Wealth accumulation?

Revolution, flashmobs, and brain chips.
A grim vision of the future

Richard Norton-Taylor
Monday 9 April 2007
Source
Information chips implanted in the brain. Electromagnetic pulse weapons. The middle classes becoming revolutionary, taking on the role of Marx's proletariat. The population of countries in the Middle East increasing by 132%, while Europe's drops as fertility falls. "Flashmobs" - groups rapidly mobilised by criminal gangs or terrorists groups.

This is the world in 30 years' time envisaged by a Ministry of Defence team responsible for painting a picture of the "future strategic context" likely to face Britain's armed forces. It includes an "analysis of the key risks and shocks". Rear Admiral Chris Parry, head of the MoD's Development, Concepts & Doctrine Centre which drew up the report, describes the assessments as "probability-based, rather than predictive".

The 90-page report comments on widely discussed issues such as the growing economic importance of India and China, the militarisation of space, and even what it calls "declining news quality" with the rise of "internet-enabled, citizen-journalists" and pressure to release stories "at the expense of facts". It includes other, some frightening, some reassuring, potential developments that are not so often discussed.

New weapons
An electromagnetic pulse will probably become operational by 2035 able to destroy all communications systems in a selected area or be used against a "world city" such as an international business service hub. The development of neutron weapons which destroy living organisms but not buildings "might make a weapon of choice for extreme ethnic cleansing in an increasingly populated world". The use of unmanned weapons platforms would enable the "application of lethal force without human intervention, raising consequential legal and ethical issues". The "explicit use" of chemical, biological, radiological, and nuclear weapons and devices delivered by unmanned vehicles or missiles.

Technology
By 2035, an implantable "information chip" could be wired directly to the brain. A growing pervasiveness of information communications technology will enable states, terrorists or criminals, to mobilise "flashmobs", challenging security forces to match this potential agility coupled with an ability to concentrate forces quickly in a small area.

Marxism
"The middle classes could become a revolutionary class, taking the role envisaged for the proletariat by Marx," says the report. The thesis is based on a growing gap between the middle classes and the super-rich on one hand and an urban under-class threatening social order: "The world's middle classes might unite, using access to knowledge, resources and skills to shape transnational processes in their own class interest". Marxism could also be revived, it says, because of global inequality. An increased trend towards moral relativism and pragmatic values will encourage people to seek the "sanctuary provided by more rigid belief systems, including religious orthodoxy and doctrinaire political ideologies, such as popularism and Marxism".

Pressures leading to social unrest
By 2010 more than 50% of the world's population will be living in urban rather than rural environments, leading to social deprivation and "new instability risks", and the growth of shanty towns. By 2035, that figure will rise to 60%. Migration will increase. Globalisation may lead to levels of international integration that effectively bring inter-state warfare to an end. But it may lead to "inter-communal conflict" - communities with shared interests transcending national boundaries and resorting to the use of violence.

Population and Resources
The global population is likely to grow to 8.5bn in 2035, with less developed countries accounting for 98% of that. Some 87% of people under the age of 25 live in the developing world. Demographic trends, which will exacerbate economic and social tensions, have serious implications for the environment - including the provision of clean water and other resources - and for international relations. The population of sub-Saharan Africa will increase over the period by 81%, and that of Middle Eastern countries by 132%.

The Middle East
The massive population growth will mean the Middle East, and to a lesser extent north Africa, will remain highly unstable, says the report. It singles out Saudi Arabia, the most lucrative market for British arms, with unemployment levels of 20% and a "youth bulge" in a state whose population has risen from 7 million to 27 million since 1980. "The expectations of growing numbers of young people [in the whole region] many of whom will be confronted by the prospect of endemic unemployment ... are unlikely to be met," says the report.

Islamic militancy
Resentment among young people in the face of unrepresentative regimes "will find outlets in political militancy, including radical political Islam whose concept of Umma, the global Islamic community, and resistance to capitalism may lie uneasily in an international system based on nation-states and global market forces", the report warns. The effects of such resentment will be expressed through the migration of youth populations and global communications, encouraging contacts between diaspora communities and their countries of origin.

Tension between the Islamic world and the west will remain, and may increasingly be targeted at China "whose new-found materialism, economic vibrancy, and institutionalised atheism, will be an anathema to orthodox Islam".

Iran
Iran will steadily grow in economic and demographic strength and its energy reserves and geographic location will give it substantial strategic leverage. However, its government could be transformed. "From the middle of the period," says the report, "the country, especially its high proportion of younger people, will want to benefit from increased access to globalisation and diversity, and it may be that Iran progressively, but unevenly, transforms...into a vibrant democracy."

Terrorism
Casualties and the amount of damage inflicted by terrorism will stay low compared to other forms of coercion and conflict. But acts of extreme violence, supported by elements within Islamist states, with media exploitation to maximise the impact of the "theatre of violence" will persist. A "terrorist coalition", the report says, including a wide range of reactionary and revolutionary rejectionists such as ultra-nationalists, religious groupings and even extreme environmentalists, might conduct a global campaign of greater intensity".

Climate change
There is "compelling evidence" to indicate that climate change is occurring and that the atmosphere will continue to warm at an unprecedented rate throughout the 21st century. It could lead to a reduction in north Atlantic salinity by increasing the freshwater runoff from the Arctic. This could affect the natural circulation of the north Atlantic by diminishing the warming effect of ocean currents on western Europe. "The drop in temperature might exceed that of the miniature ice age of the 17th and 18th centuries."

Related

Revolution in Military Affairs: From Computer Generated Insurgents to Bioelectric Implants

Big brother

Robotics

Civil liberties

Biometrics

The Rockefeller roots of the United Nations
Video

8 years in 8 minutes
Video. How we got here (ahem).

Things I read December 9, 2008

Former ISI Chief: Mumbai And 9/11 Both “Inside Jobs”
For years, people who have followed the money trail on 911 have said it leads back to the ISI. Here is the Ex ISI Chief suggesting the same. Must be another case of when 'is' isn't 'is'.

The Curse of Global Capitalism
Any parasite which draws more from its host than the host can sustain, will eventually kill it...Some cancers are too far spread to be removed at no cost. And yet to continue living with it is a guarantee of a slow and painful death, from which no recovery will be possible. Some very clear thinking here.

Blame the Takers, Not the Makers

Sponsor an Executive
Have a laugh.

US: Blackwater used grenades on unarmed Iraqis
Bastards...they ought to be flayed.

Men really are the weaker sex, say scientists
Maybe this is not a bad thing.

India, Russia sign 10 new energy agreements
Looks like the Empire has come up against a BRIC wall.

The panopticon economy
It's the new Big Brother house. But we wont be seeing inside it on television.

OBAMA REVITALIZES DISASTER CAPITALISM: THE SHOCK DOCTRINE RECEIVES A MAKE-OVER

Obama to send 'clear message' to Russia over neighbors
What nonsense! Especially after the whole world knows Georgia started the war at the behest of the USA.

Russia against U.S. missiles in any European anti-missile plans
And Russia's response.