Dear Minister,
I would like to bring your attention to the issuing of passports.
I have just renewed my passport. My old passport had 6 months left to run, but I wanted to get the task out of the way.
My new passport arrived this morning, but I see that the life of the passport is 10 years from now. The time remaining to my old passport was not added to the lifespan of this new passport.
Although it is only a small issue, nonetheless I'd like to see the rules changed in this regard. I have a passport from another jurisdiction, and when I renew there, they give me a new passport for 10 years, plus the remaining time on my old passport. This appears only fair as the period of passport coverage should not have to be paid for twice. That effectively penalises people for renewing their passport early/on time.
I see from the rules that a passport can only be issued for a maximum of 10 years, but I would urge that the rules be udpdated to allow for the preservation of time that customers paid for on their previous passport. It will mean less expense, more utility for the customer and less administration for the passport office.
Wednesday, May 23, 2012
Tuesday, May 22, 2012
Household V Business debt -revisited with new numbers
http://www.centralbank.ie/polstats/stats/cmab/Documents/ie_table_a.6_loans_to_irish_residents_-_outstanding_amounts_(incl._securitised_loans).xls
As observed previously, the reduction in private debt in ireland is outpacing the accumulation of public debt. We as a country are more than breaking even and are in fact mending our position (financially at least, the economy is still dire).
However, this reduction in private debt is almost all occuring in the business sector, and households are not achieving any serious improvement in their debt positions.
Between Jan 2009 (the peak of debt) and today (may 2012), households have reduced their debts from 184 billion to 159 billion (14%). Whereas (non-financial) businesses have reduced their debts from 166 billion to 87 billion (48%).
Obviously, a certain amount of this debt reduction in both the household and the business sector is occuring through writedowns, bankruptcies, defaults etc.. I do not have figures to quantify this though.
Nevertheless, the picture is stark. Business has reduced debts dramatically, and they are now roughly half what they were, in just 3 years of austerity. It seems unbelievable to me that this could have been achieved by writedowns alone (indeed the amount of debt reduction is even larger than the total loan loss provisioning of the Irish banks), and a substantial part of it must have come from profits being diverted to paying off debt.
It seems obvious that businesses have access to a significant income stream, that serious profits are being made (despite the continual pleading), and that our tax system (geared towards taxing households rather than business) is increasingly unfit for purpose. It made sense previously, but our low corporation tax is obviously an imbalancing force, which is allowing business to make supernormal profits while households seem to have hardly anything surplus at all with which to mend their positions.
This policy must change. We are in a crisis, we can no longer afford to maintain policies that surrender business tax revenues, placing all the strain on the rest of society. Businesses are increasingly debt free and should not be spared the tax burden that debt choked households bear.
As observed previously, the reduction in private debt in ireland is outpacing the accumulation of public debt. We as a country are more than breaking even and are in fact mending our position (financially at least, the economy is still dire).
However, this reduction in private debt is almost all occuring in the business sector, and households are not achieving any serious improvement in their debt positions.
Between Jan 2009 (the peak of debt) and today (may 2012), households have reduced their debts from 184 billion to 159 billion (14%). Whereas (non-financial) businesses have reduced their debts from 166 billion to 87 billion (48%).
Obviously, a certain amount of this debt reduction in both the household and the business sector is occuring through writedowns, bankruptcies, defaults etc.. I do not have figures to quantify this though.
Nevertheless, the picture is stark. Business has reduced debts dramatically, and they are now roughly half what they were, in just 3 years of austerity. It seems unbelievable to me that this could have been achieved by writedowns alone (indeed the amount of debt reduction is even larger than the total loan loss provisioning of the Irish banks), and a substantial part of it must have come from profits being diverted to paying off debt.
It seems obvious that businesses have access to a significant income stream, that serious profits are being made (despite the continual pleading), and that our tax system (geared towards taxing households rather than business) is increasingly unfit for purpose. It made sense previously, but our low corporation tax is obviously an imbalancing force, which is allowing business to make supernormal profits while households seem to have hardly anything surplus at all with which to mend their positions.
This policy must change. We are in a crisis, we can no longer afford to maintain policies that surrender business tax revenues, placing all the strain on the rest of society. Businesses are increasingly debt free and should not be spared the tax burden that debt choked households bear.
SPQR -Sono pazzi questi Romani
I have in recent months attended 2 meetings of the We are Church movement. On both occasions, the meeting was very slow to warm up, but when it did, it was very exciting.
As said in a previous post, this group, and others like it in other countries, is a group of committed catholics who are questioning aspects of the catechism that seem to conflict with the central christian message. In particular they have identified 5 areas where most catholics would agree the (man-made and antiquated) catechism is wrong and contradicts the christian message.
I have been particularly impressed with one woman who said on the first occasion I was there: " the only thing I can control is myself". Last night she said, "We can't change them (the catholic hierarchy), but we can refuse to be changed by them". This woman is a great inspiration to me, a true revolutionary, using nothing but self-determination to fight the vast Roman church. The humility and confidence of a seemingly frail lady is truly awesome.
I am a little pessimistic that change will come about, but at least I want to be on the right side of the debate. I intend to go back again.
The group is holding a pentecost celebration in the Davenport hotel this Sunday at 3pm.
As said in a previous post, this group, and others like it in other countries, is a group of committed catholics who are questioning aspects of the catechism that seem to conflict with the central christian message. In particular they have identified 5 areas where most catholics would agree the (man-made and antiquated) catechism is wrong and contradicts the christian message.
I have been particularly impressed with one woman who said on the first occasion I was there: " the only thing I can control is myself". Last night she said, "We can't change them (the catholic hierarchy), but we can refuse to be changed by them". This woman is a great inspiration to me, a true revolutionary, using nothing but self-determination to fight the vast Roman church. The humility and confidence of a seemingly frail lady is truly awesome.
I am a little pessimistic that change will come about, but at least I want to be on the right side of the debate. I intend to go back again.
The group is holding a pentecost celebration in the Davenport hotel this Sunday at 3pm.
Thursday, May 17, 2012
Grid West consultation 17/5/2012
Grid West consultation 17/5/2012 -http://www.eirgridprojects.com/media/6424%20Study%20Area%20Rationale%20010512.pdf
Dear sirs/madams,
Before making my observations, I would like to express my great excitement at the proposal to develop a high quality grid infrastructure in the NorthWest. This area, for historic reasons, has been one of the poorer areas of the country, with consequently less facilities than the rest of the country. It is a constant struggle to attract industry to the West, and a stable, high capacity electricity supply is one of the most important factors for the future catch up of the region with the rest of the country. I am delighted that you are beginning this process, and I hope that it progresses quickly.
1. I would like to advocate that the connections built, be of a high capacity. The approval of power lines has become controversial in recent years, and I fear that if an inadequate grid is installed in this process, it will be even more difficult to expand it later, than it would be right now. Therefore, I would urge that the connections to Flagford and Cashla, should be of an ambitious capacity, to allow for future industrial growth, without necessitating a return to the planning process.
2. I would like to advocate that both connections be advanced simultaneously, or if this is not possible, that detailed planning and permission be sought for both. Even if there is only money for one line, I would like to see the other well planned, and disputes with local landowners ironed out in advance –so that when money does become available, the second line can proceed smoothly and quickly.
3. If only one line can progress at first, I would advocate Flagford –Bellacorick. The Cashla route already has a direct connection to bellacorick –albeit small- and building this connector will only increase capacity. Whereas, the flagford route, is not replacing a direct connection, and will therefore, not only increase capacity, but improve the robustness of the system too. Flagford seems the most beneficial of the two routes –though, obviously, both should be built.
4. I am a little sceptical of the future of massive windfarms. I suspect we are experiencing something of a bubble in this area at present. Large scale wind is only one of numerous renewable energies that will be available in future, and it is not at all clear that it will be the cheapest/most successful. I believe that the grid should be designed with the possibility of distributed generation from small scale wind/pv/hydro outfits in mind. We need a grid, capable of absorbing such distributed power sources if and when they become available. I do not have the technical expertise to comment on what would be necessary for large scale distributed generation, but I believe it is crucial we prepare for it as it is likely to become a major power source. In particular, I would like to point out, that distributed generation has a great advantage in terms of access to capital; far in excess of large scale projects. The technology already exists and simply needs to come down in price for a massive increase in this form of power being made available to the grid. We must prepare today for this.
5. Finally, I would like to point out that a new broadband connection is to land in Belmullet soon. There is scope for data centres and other connection heavy enterprises to develop in Mayo on foot of this. These centres are often very energy intensive, and the sooner this grid is developed, the sooner we can set to work attracting such high end, high profit businesses to the region. I urge that the project proceed quickly.
Wednesday, May 2, 2012
My guide to happy trails
Years ago, a good friend of mine was embarking on a big backpacking trip. He asked if I had any tips for him. Initially I couldn't think of anything, but later I wrote him an email, and once I got started I realised there are dozens of well-known maxims that are bandied about by backpackers. Here is the list I sent him, no doubt there are many more that could be added to this:
My guide to happy trails
-avoid salad (it's usually been washed in dirty water)
-don't set off with a full pack (you'll acquire some things along the way -either souvenirs or specialised clothes)
-don't trust a stranger who speaks perfect english, especially if they are trying to take you to somewhere i.e. a 2nd location, not of your choosing
-use small bags inside your backpack to divide up the various groups of things in your pack
-time spent regularly organising your pack is never wasted time (you may have to leave in a hurry; especially if it's a lawless place)
-if you're carrying dollars, try to carry small denominations. Poor people rarely have change for a 50.
-if you get into trouble, don't panic, most likely they only want your cash
-smile
-never steal from backpackers or locals, they will probably detect the crime and retribution can be brutal
-remember, tourists naturally attract some of the worst people (conmen, thieves etc.). If you have a bad experience, don't damn everyone because of it, just make sure you find some genuine people.
-avoid arriving into a new town late in the day, and especially if it will be after dark. It's harder to get accommodation and with your pack you are a target for crime.
-Dehydration is the backpackers worst enemy. Between diaorrhea, unreliable water supplies and sweating, you will be constantly under threat of dehydration. This can cause sunburn, constipation, dizzyness and a host of nasties. It's the most common pitfall.
-Guidebooks can be a lifeline when you're stuck for accommodation/food etc., however, some people cling to them so closely that they rarely do anything that's not in the guide. Don't be afraid to go pot luck and find something of your own.
-Don't fall out with your companions (sometimes easier said than done). Cabin fever, heat and exhaustion can make anyone testy.
-If you do get sick, be careful about using anti-diaorrhoea pills. Too much and you can be corked up for a week. Moderate diaorrhoea is harmless enough, constipation can slow you to a crawl. Long bus journeys don't help either.
-If you're using a map in a dodgy neighbourhood, you can step into a doorway or some other relatively concealed spot. Standing in the middle of the street looking at a map is like lighting up 'lost and helpless' in neon lights on your head. Same goes for money.
-taximen are necessary, but don't let them take you somewhere you hadn't heard of before you got into the cab; it's probably their brother's shop where you'll have to buy all sorts of rubbish to get out again. Or it could be somewhere worse.
-Don't buy cheap stuff in your first week, unless you're prepared to carry it for the rest of the trip or else are posting it home.
-No matter where you are, there is always transport nearby, you just have to find it.
-If you get off a bus/train and are besieged with drivers offering to take you somewhere, you're in trouble. They probably have an ulterior motive for driving you. They definitely want to overcharge you. This is an impossible situation; if you work out how to deal with it tell me.
-Some of the best food you can eat is in places filled with locals. It's best if you can watch them fry it. You might get sick, but Western style food outside of the West is often improperly cooked rubbish. Locals can generally cook local dishes well.
-wash your hands before you eat. You are in contact with a lot of things your body has never seen before.
-fruit that you peel is generally safe (bananas, oranges)
-you are not alone. Thousands of backpackers have gone before you. They will swap information about places, pitfalls, travel arrangements, they are your best source of information. They are sometimes interesting too (varies).
-local alcohol is fun, but don't expect to taste anything tomorrow
-Some towns have only one method of transport out of them. They are generally small and nice, but consider if they are unsafe before you put yourself in a cul de sac. Also, make sure you won't have to wait 2 days to catch the next buffalo out of town.
-take a walk in the countryside at least once
-if a place smells like shit, it probably is. It may have an open sewer nearby, you're better off avoiding it if possible. Definitely don't eat there.
-a fan in a bedroom is a simple way to keep away flies (but it can dehydrate you). Opinions differ on air conditioning, although I believe it just prevents you acclimatising.
-incence, tiger balm and other smellies are one of the easiest ways to keep away flies.
-dogs are not the same when you are abroad. they are treated differently by society and they act differently in response.
-a small padlock can be handy in some hostels where you have a locker.
-hiking boots are really heavy. Unless you're going to use them a lot -don't bring them. A pair of light shoes and a pair of sandals is my favoured combination.
-books are heavy too. There will be opportunities to swap books with other people as you go, but be prepared to end up reading slushy romance novels about alien zombies.
-If you have a guide book for one country, you may be able to swap for one about the next country with someone going the opposite direction at the border.
-The most important word in any language is 'pardon'. Even if you can't say thank you to someone who helps you, it's more important to be able to apologise to someone you rub up the wrong way.
-Check ahead to see if there are any festivals or events happening close to your route.
-blogging or regular group emails are a simple way to tell your story to everyone as you go along. It's not for everyone, but it can save you having to recount your story a hundred times when you return.
-Take pictures for your friends to see.
-if you suspect are in trouble you will always have the option of leaving town. Never forget this, as it's often the best and simplest solution to a problem and in a panic you may overlook it.
-swimming is lovely but dangerous. Leaches, water-borne diseases, currents, concealed rocks. Of course you will go swimming, hopefully a lot, but be aware that you are responsible for your own safety, especially in big rivers with fast currents. Some people think that somehow water is less dangerous because they are abroad. I myself have had several near ones by thinking that because a sign or a passing local says it's safe to swim that that means it is totally safe. Water is never totally safe.
-If some backpacker acts as if they know it all, they know nothing (that goes double for me)
You'll probably break almost every one of these rules -and be right to do it in the circumstances. You've got to have a good time in spite of all these cautions.
Talk to fellow travellers. Backpackers are often (not always) very gentle souls with modest personalities and an openness to new things. Some of them have travelled extensively. They are typically good advisers with local knowledge. They have often learnt things the hard way, so talking with them means you can learn things the easy way. They will know the problems you will face much better than anyone writing in abstract can.
Happy Trails
My guide to happy trails
-avoid salad (it's usually been washed in dirty water)
-don't set off with a full pack (you'll acquire some things along the way -either souvenirs or specialised clothes)
-don't trust a stranger who speaks perfect english, especially if they are trying to take you to somewhere i.e. a 2nd location, not of your choosing
-use small bags inside your backpack to divide up the various groups of things in your pack
-time spent regularly organising your pack is never wasted time (you may have to leave in a hurry; especially if it's a lawless place)
-if you're carrying dollars, try to carry small denominations. Poor people rarely have change for a 50.
-if you get into trouble, don't panic, most likely they only want your cash
-smile
-never steal from backpackers or locals, they will probably detect the crime and retribution can be brutal
-remember, tourists naturally attract some of the worst people (conmen, thieves etc.). If you have a bad experience, don't damn everyone because of it, just make sure you find some genuine people.
-avoid arriving into a new town late in the day, and especially if it will be after dark. It's harder to get accommodation and with your pack you are a target for crime.
-Dehydration is the backpackers worst enemy. Between diaorrhea, unreliable water supplies and sweating, you will be constantly under threat of dehydration. This can cause sunburn, constipation, dizzyness and a host of nasties. It's the most common pitfall.
-Guidebooks can be a lifeline when you're stuck for accommodation/food etc., however, some people cling to them so closely that they rarely do anything that's not in the guide. Don't be afraid to go pot luck and find something of your own.
-Don't fall out with your companions (sometimes easier said than done). Cabin fever, heat and exhaustion can make anyone testy.
-If you do get sick, be careful about using anti-diaorrhoea pills. Too much and you can be corked up for a week. Moderate diaorrhoea is harmless enough, constipation can slow you to a crawl. Long bus journeys don't help either.
-If you're using a map in a dodgy neighbourhood, you can step into a doorway or some other relatively concealed spot. Standing in the middle of the street looking at a map is like lighting up 'lost and helpless' in neon lights on your head. Same goes for money.
-taximen are necessary, but don't let them take you somewhere you hadn't heard of before you got into the cab; it's probably their brother's shop where you'll have to buy all sorts of rubbish to get out again. Or it could be somewhere worse.
-Don't buy cheap stuff in your first week, unless you're prepared to carry it for the rest of the trip or else are posting it home.
-No matter where you are, there is always transport nearby, you just have to find it.
-If you get off a bus/train and are besieged with drivers offering to take you somewhere, you're in trouble. They probably have an ulterior motive for driving you. They definitely want to overcharge you. This is an impossible situation; if you work out how to deal with it tell me.
-Some of the best food you can eat is in places filled with locals. It's best if you can watch them fry it. You might get sick, but Western style food outside of the West is often improperly cooked rubbish. Locals can generally cook local dishes well.
-wash your hands before you eat. You are in contact with a lot of things your body has never seen before.
-fruit that you peel is generally safe (bananas, oranges)
-you are not alone. Thousands of backpackers have gone before you. They will swap information about places, pitfalls, travel arrangements, they are your best source of information. They are sometimes interesting too (varies).
-local alcohol is fun, but don't expect to taste anything tomorrow
-Some towns have only one method of transport out of them. They are generally small and nice, but consider if they are unsafe before you put yourself in a cul de sac. Also, make sure you won't have to wait 2 days to catch the next buffalo out of town.
-take a walk in the countryside at least once
-if a place smells like shit, it probably is. It may have an open sewer nearby, you're better off avoiding it if possible. Definitely don't eat there.
-a fan in a bedroom is a simple way to keep away flies (but it can dehydrate you). Opinions differ on air conditioning, although I believe it just prevents you acclimatising.
-incence, tiger balm and other smellies are one of the easiest ways to keep away flies.
-dogs are not the same when you are abroad. they are treated differently by society and they act differently in response.
-a small padlock can be handy in some hostels where you have a locker.
-hiking boots are really heavy. Unless you're going to use them a lot -don't bring them. A pair of light shoes and a pair of sandals is my favoured combination.
-books are heavy too. There will be opportunities to swap books with other people as you go, but be prepared to end up reading slushy romance novels about alien zombies.
-If you have a guide book for one country, you may be able to swap for one about the next country with someone going the opposite direction at the border.
-The most important word in any language is 'pardon'. Even if you can't say thank you to someone who helps you, it's more important to be able to apologise to someone you rub up the wrong way.
-Check ahead to see if there are any festivals or events happening close to your route.
-blogging or regular group emails are a simple way to tell your story to everyone as you go along. It's not for everyone, but it can save you having to recount your story a hundred times when you return.
-Take pictures for your friends to see.
-if you suspect are in trouble you will always have the option of leaving town. Never forget this, as it's often the best and simplest solution to a problem and in a panic you may overlook it.
-swimming is lovely but dangerous. Leaches, water-borne diseases, currents, concealed rocks. Of course you will go swimming, hopefully a lot, but be aware that you are responsible for your own safety, especially in big rivers with fast currents. Some people think that somehow water is less dangerous because they are abroad. I myself have had several near ones by thinking that because a sign or a passing local says it's safe to swim that that means it is totally safe. Water is never totally safe.
-If some backpacker acts as if they know it all, they know nothing (that goes double for me)
You'll probably break almost every one of these rules -and be right to do it in the circumstances. You've got to have a good time in spite of all these cautions.
Talk to fellow travellers. Backpackers are often (not always) very gentle souls with modest personalities and an openness to new things. Some of them have travelled extensively. They are typically good advisers with local knowledge. They have often learnt things the hard way, so talking with them means you can learn things the easy way. They will know the problems you will face much better than anyone writing in abstract can.
Happy Trails
Thursday, February 23, 2012
submission to the EU affairs committee about the fiscal treaty
I would like to submit the following in response to your appeal for submissions on the EU fiscal treaty.
Broadly I welcome the treaty itself, but I am extremely sceptical it will prevent future crises and am concerned it will give a false sense of security from the very serious problems which remain in the Eurozone. These problems are I believe unsolvable unless we either leave the Euro or agree to much deeper and more unpalatable common reforms.
Firstly, a body of rules on public debt and deficits is a good idea for each individual Member State (MS). Therefore, as a framework agreement for each MS to implement such rules, the new treaty is I believe a good thing for the Union as a whole. Having sustainable public finances is unarguably a good thing.
However, the calculation of structural deficits is something less than a science, and fiscal rules proscribed by an international treaty are unnervingly inflexible. In cases of extreme adjustment, we will be dependent on our partners to allow us to exercise fiscal room for manoeuvre. I do not doubt that it will be possible to secure such consent if necessary, but it is nonetheless a power over our budget that should not be taken lightly. Implementing this treaty will pose challenges for all MSs -including those who currently enjoy benign conditions. There will undoubtedly be moments when we regret such a significant commitment and even bend the rules for expediency -but in the long run it is a good agenda.
My main problem with the treaty is that I believe it will not fix the much deeper problems of a common currency. I believe this treaty is the result of an incomplete interpretation of the source of the crisis and is addressed to some of the symptoms of the problem rather than the problem itself. It is a stricter form of the ineffective Stability and Growth Pact, which was never implemented, but which in any case would not have averted the crisis that has recently unfolded.
Without embarking on the huge task of summarising the crisis, let me make a few key observations about the crisis before examining how this treaty is likely to impact on future such crises.
This crisis was primarily the result of having a single monetary policy across a diverse union. In every MS, monetary policy was either too tight or too loose. In central Europe, where a decade of sclerotic growth prevailed in recent years, monetary policy was too tight and did not assist in generating activity. However, the problem was far more obvious in the less populated periphery countries, where an overly loose monetary policy led to a binge of debt. In Greece and Italy, this binge was primarily in the public sphere. Taxation collection slid as expenditure rose. The State had access to cheap money and used it. In Ireland and Spain, the overly loose monetary policy fed into private demand and especially construction loans.
Though these problems were different, it is important to recognise that they stem from the same problem of inappropriate monetary policy in individual MSs. The sluggish countries were reducing the capital available to themselves when they needed it most, and instead lending it to the countries that needed to reign in their borrowing -in effect the system made everyone's problems worse. This was predicted by economists long before the currency came into being and it seems their models have been tragically accurate.
As the crisis broke, credit dried up and in Greece this resulted in a crisis in the State finances. In Ireland it led to a crisis in the banks and also amongst individual borrowers who had overborrowed on the strength of a property bubble.
So how does the fiscal treaty propose to fix the problem of a one size fits all monetary policy?
Quite simply it does not. It proposes to control public borrowing only. This will prevent a future Greece. But it will in turn spawn a series of Spains and (Saints preserve us!) a string of Irelands. The fiscal treaty ignores the problem of inappropriate common monetary policy and instead focuses on the symptom of this problem in selected countries -i.e. public largesse. Meanwhile, private lending and borrowing is to be merely monitored, without further restrictions. Indeed, capital restrictions would be anathema to EU law.
The notion that more disciplined countries will not succumb to cheap money in the future when their monetary policy is inappropriately loose is naive at best -Racist at worst. The narrative of the virtuous countries versus the unvirtuous does nothing to explain the crisis and even shames us all. In reality we are fooling ourselves and setting ourselves up for a cycle of boom and bust where private debt bubbles will occur in country after country.
The fiscal treaty cannot easily be extended to cover the private sphere. MSs may agree to limit their indebtedness, but in market economies, the State does not have any useful power to bind private individuals from borrowing from or lending to one another. They can only manipulate the overall level of money available to financiers -i.e. monetary policy. But monetary policy is of little use in the Eurozone, because the money made available to sluggish countries will immediately be lent to the booming countries, making their situation worse.
Therefore, (without trying to be intentionally stark and provocative), I believe the Eurozone has only 4 options:
-A boom and bust cycle where individual MSs all endure periodic collapses, austerity and reform. No country can resist the allure of cheap money and even the "virtuous" will succumb.
-A common budget, issuing common debt and spending without regard to MS borders.
-A move by MSs to a centrally planned communist economy where all financial transactions are controlled by the State and dictated by national economic conditions.
-A dissolution of the Eurozone and a return to free floating currencies.
Given such horrific options, I must confess I favour a controlled exit at the first available opportunity. I write this as a committed Europhile and a great believer in the European project as both an instrument of prosperity and of peace. However, the Euro is not a workable currency, and this treaty does nothing to address this. The Euro is in fact going to destroy European unity and this completely inadequate treaty only serves to highlight the incomprehension of European leaders of the problems that are built in to monetary union.
In summation, I commend the treaty, but nevertheless advocate a withdrawal from the common currency at the earliest opportunity. It is particularly difficult to reach this conclusion when I am aware of how much money and sacrifice Ireland has sunk into retaining Euro membership in recent years -but the alternatives are unthinkable.
Whatever advantages the currency brings (e.g. attracting international investments, reduced transaction fees) is entirely unjustified when you consider the costs of remaining part of it. Noone will want to invest in Ireland while its currency is as inherently unstable as it is now apparent the Euro is. Noone will have faith in a currency that is doomed to boom and bust. Exit is the only sensible strategy.
sincerely
Ger
Broadly I welcome the treaty itself, but I am extremely sceptical it will prevent future crises and am concerned it will give a false sense of security from the very serious problems which remain in the Eurozone. These problems are I believe unsolvable unless we either leave the Euro or agree to much deeper and more unpalatable common reforms.
Firstly, a body of rules on public debt and deficits is a good idea for each individual Member State (MS). Therefore, as a framework agreement for each MS to implement such rules, the new treaty is I believe a good thing for the Union as a whole. Having sustainable public finances is unarguably a good thing.
However, the calculation of structural deficits is something less than a science, and fiscal rules proscribed by an international treaty are unnervingly inflexible. In cases of extreme adjustment, we will be dependent on our partners to allow us to exercise fiscal room for manoeuvre. I do not doubt that it will be possible to secure such consent if necessary, but it is nonetheless a power over our budget that should not be taken lightly. Implementing this treaty will pose challenges for all MSs -including those who currently enjoy benign conditions. There will undoubtedly be moments when we regret such a significant commitment and even bend the rules for expediency -but in the long run it is a good agenda.
My main problem with the treaty is that I believe it will not fix the much deeper problems of a common currency. I believe this treaty is the result of an incomplete interpretation of the source of the crisis and is addressed to some of the symptoms of the problem rather than the problem itself. It is a stricter form of the ineffective Stability and Growth Pact, which was never implemented, but which in any case would not have averted the crisis that has recently unfolded.
Without embarking on the huge task of summarising the crisis, let me make a few key observations about the crisis before examining how this treaty is likely to impact on future such crises.
This crisis was primarily the result of having a single monetary policy across a diverse union. In every MS, monetary policy was either too tight or too loose. In central Europe, where a decade of sclerotic growth prevailed in recent years, monetary policy was too tight and did not assist in generating activity. However, the problem was far more obvious in the less populated periphery countries, where an overly loose monetary policy led to a binge of debt. In Greece and Italy, this binge was primarily in the public sphere. Taxation collection slid as expenditure rose. The State had access to cheap money and used it. In Ireland and Spain, the overly loose monetary policy fed into private demand and especially construction loans.
Though these problems were different, it is important to recognise that they stem from the same problem of inappropriate monetary policy in individual MSs. The sluggish countries were reducing the capital available to themselves when they needed it most, and instead lending it to the countries that needed to reign in their borrowing -in effect the system made everyone's problems worse. This was predicted by economists long before the currency came into being and it seems their models have been tragically accurate.
As the crisis broke, credit dried up and in Greece this resulted in a crisis in the State finances. In Ireland it led to a crisis in the banks and also amongst individual borrowers who had overborrowed on the strength of a property bubble.
So how does the fiscal treaty propose to fix the problem of a one size fits all monetary policy?
Quite simply it does not. It proposes to control public borrowing only. This will prevent a future Greece. But it will in turn spawn a series of Spains and (Saints preserve us!) a string of Irelands. The fiscal treaty ignores the problem of inappropriate common monetary policy and instead focuses on the symptom of this problem in selected countries -i.e. public largesse. Meanwhile, private lending and borrowing is to be merely monitored, without further restrictions. Indeed, capital restrictions would be anathema to EU law.
The notion that more disciplined countries will not succumb to cheap money in the future when their monetary policy is inappropriately loose is naive at best -Racist at worst. The narrative of the virtuous countries versus the unvirtuous does nothing to explain the crisis and even shames us all. In reality we are fooling ourselves and setting ourselves up for a cycle of boom and bust where private debt bubbles will occur in country after country.
The fiscal treaty cannot easily be extended to cover the private sphere. MSs may agree to limit their indebtedness, but in market economies, the State does not have any useful power to bind private individuals from borrowing from or lending to one another. They can only manipulate the overall level of money available to financiers -i.e. monetary policy. But monetary policy is of little use in the Eurozone, because the money made available to sluggish countries will immediately be lent to the booming countries, making their situation worse.
Therefore, (without trying to be intentionally stark and provocative), I believe the Eurozone has only 4 options:
-A boom and bust cycle where individual MSs all endure periodic collapses, austerity and reform. No country can resist the allure of cheap money and even the "virtuous" will succumb.
-A common budget, issuing common debt and spending without regard to MS borders.
-A move by MSs to a centrally planned communist economy where all financial transactions are controlled by the State and dictated by national economic conditions.
-A dissolution of the Eurozone and a return to free floating currencies.
Given such horrific options, I must confess I favour a controlled exit at the first available opportunity. I write this as a committed Europhile and a great believer in the European project as both an instrument of prosperity and of peace. However, the Euro is not a workable currency, and this treaty does nothing to address this. The Euro is in fact going to destroy European unity and this completely inadequate treaty only serves to highlight the incomprehension of European leaders of the problems that are built in to monetary union.
In summation, I commend the treaty, but nevertheless advocate a withdrawal from the common currency at the earliest opportunity. It is particularly difficult to reach this conclusion when I am aware of how much money and sacrifice Ireland has sunk into retaining Euro membership in recent years -but the alternatives are unthinkable.
Whatever advantages the currency brings (e.g. attracting international investments, reduced transaction fees) is entirely unjustified when you consider the costs of remaining part of it. Noone will want to invest in Ireland while its currency is as inherently unstable as it is now apparent the Euro is. Noone will have faith in a currency that is doomed to boom and bust. Exit is the only sensible strategy.
sincerely
Ger
Thursday, February 16, 2012
quantitative easing has been happening unannounced
This blog has previously spoken in favour of Quantitative Easing in the Eurozone.
I am therefore glad to observe that since then, the ECB has embarked on a massive money printing program, lending this money to financial institutions at an ultra low 1% rate.
Though they are not calling this Quantitative Easing -that is exactly what it is, and the relative stability of the markets in the face of what seems like a strong possibility of a Greek default, is testament to the availability of liquidity in the system. This is entirely necessary for the next few years until the burden of debt has shaken down and it is clear who owns what.
I am therefore glad to observe that since then, the ECB has embarked on a massive money printing program, lending this money to financial institutions at an ultra low 1% rate.
Though they are not calling this Quantitative Easing -that is exactly what it is, and the relative stability of the markets in the face of what seems like a strong possibility of a Greek default, is testament to the availability of liquidity in the system. This is entirely necessary for the next few years until the burden of debt has shaken down and it is clear who owns what.
Subscribe to:
Posts (Atom)