Conor Killeen, the chief executive and founder of Key Capital, says Ireland's real leverage with the Germans is the currency exit option and default.
"And
I know that everyone will say 'But we can’t leave. We would be rudderless and a
cork on a stormy ocean' etc. But, excuse me, we can most certainly leave. And we
should not be afraid or embarrassed to say this. After all, we are the guys who
have done everything asked of us. We are the country being reneged on."
This doesn't seem very clever unless we are prepared to actually quit -
- wonder would Key Capital advice its clients to keep its euros in Ireland for
conversion to punts.
Colm McCarthy, the economist, opened
a thread on the Irish Economy site on the issue:
These are 2 of my contributions:
Post 1:
There was a guy on Thursday called John Boehner who got his old job back and
broke down in tears.
He had reason to as he and his fellow gang members haven’t been very good at
hostage taking. They have had a record since 1995 but have usually caved-in,
ending up shooting themselves in the feet.
John Boehner was re-elected as Speaker of the US Congress Thursday. His friends
in The Wall Street Journal said:
“We’ll support efforts to cut spending and reform entitlements, but the
political result will be far worse if Republicans start this fight only to
cave in the end. You can’t
take a hostage you aren’t prepared to shoot. Do
the two GOP leaders have a better strategy today than they did in 2011, and
do they have the backbench support to execute it?”
So the key missing ingredient in Conor Killeen’s argument is that it’s obvious
that Ireland is not prepared for an exit from the euro. Would the threat to
leave the euro have credibility and what would be the consequences of the threat
even if wasn’t serious? After all, in terms of project management and decisions
made in haste (Sept 2008?), the record isn’t good. It took 49 years to build a
motorway from Dublin to Cork!
Wonder how the exit or threat of it, could be managed in a panic situation!
Like so many proposals made in recent years, there is the luxury of not having
to consider the downsides.
We cannot generate sustainable jobs ourselves to maintain an advanced country
standard of living.
Newt Gingrich, the architect of Grand Old Duke of York US fiascos in 1995 and
1996 cautioned this week:
“They’ve got to find, in the House, a totally new strategy. Everybody’s now
talking about, ‘Oh, here comes the debt ceiling.’ I think that’s, frankly, a
dead loser. Because in the end, you know it’s gonna happen. The whole
national financial system is going to come in to Washington and on
television, and say: ‘Oh my God, this will be a gigantic heart attack, the
entire economy of the world will collapse. You guys will be held
responsible.’ And they’ll cave.”
Killeen says:
"Regaining our national self-esteem or reaffirming our sovereignty is not
optional. It is necessary.
The point is, all things being equal, we will have to default without a deal
on our bank recap debt. Therefore, best accept this and accelerate the
discussion to generate the best outcome for Ireland.
As soon as we get serious about planning an exit, chaos will break out in
many markets."
Self-esteem and sovereignty are relative terms when most of the new FDI jobs in
the past decade have been in the foreign-controlled financial services sector.
Even if 40% is chopped off the value of exports to discount for MNC tax
strategies, indigenous exports would still only account for 20% of the total!
Post 2:
Let's
not forget that the State bank guarantee was issued on the day of Anglo's
financial year end to effectively save it. Just over 4 months later in Jan 2009,
when it was decided to nationalise the bank, Ireland had ZERO leverage
with Europe, having unilaterally disarmed on Sept 30, 2008.
It is
of course more than a trivial issue that during the bubble, none among the local
denizens of finance had the cojones to publicly address the sartorial
shortcomings of the little emperors and NCB Stockbrokers, Conor Killeen's old
firm, housed some of the most ardent devotees of demographic
fetishism, who provided the theological underpinning to the then famed Maestros
of Merrion Street.
Jean-Baptiste Say (1767-1832), a businessman who was the first professor of
political economy in France, and who is said to have coined the word
entrepreneur ('l'entrepreneur d'industrie'), is identified with the claim that
supply creates its own demand. However the short-run and the long-run should of
course be distinguished and Colm McCarthy pointed out in 2008 that: "If rapid
population growth were the key to economic prosperity, sub-Saharan Africa rather
than East Asia would be the current Wirtschaftswunder."
What is extraordinary is the enduring surrealism in the debate on the
national economy.
We have ministers being deluded by spin: last year the minister for finance
opined that growth would take off 'like a rocket' when an international recovery
takes hold (are there fools forecasting rocket growth in Europe and the US?) and
this week, the deputy prime minister dabbled in astrology predicting "enormous
potential for growth to our economy" in 2014 when "the political and economic
landscape will alter radically."
Then its easy to be fooled by those huge 'exports' that Google and others
magic up for us.
Here are headlines from Friday: Surging exports spur Irish services on
in December - PMI (Reuters); Services buoyed by surging exports (Irish Times);
Surging exports spur Irish services on in December - NCB (RTÉ); Services
activity remained strong in December -- with some help from tax strategies
(Finfacts)
Colm McCarthy made some other perceptive comments in 2008 which should be
used to counter the growth fantasies of Noonan, Gilmore and their echoes in the
media, universities and so on:
"Some well-heeled friends of mine held a pre-Christmas bash to mark
the passing of the Tiger, which had been kind to them, but I think they were
about six years late. Between 1994 and 2000, Ireland's real GNP rose by more
than six per cent every single year. But since then, the rate of GNP growth has
exceeded six per cent only once, in 2006. That was the year we (unfortunately)
built 88,000 houses, an unsustainable figure which artificially boosted the
growth rate.
On this reading, the true Celtic-Tiger period ended about 2001, since
which time the economy has been operating around a more modest growth rate of
four to five per cent, with excessive reliance on a credit-fuelled housing
sector. The growth rate will be nowhere near this figure in 2008, and the return
of the eight and even 10 per cent GNP growth rates of the mid- to late 1990s is
a pipe dream."
Adam Davidson in the NYT today concludes a story on the prospects for the US
economy:
"The
story of this recovery may be unusually opaque, but the brightest forecasts are
built less on a return to old consumption levels than on, for example, fracking.
And that’s not necessarily a bad thing. There was so much bubbly growth in
houses, cars and appliances during the mid-2000s, that it’s hard to see how any
kind of return to those levels would lead to a healthy economy. The best thing
we could hope for, paradoxically, is a return to 1999."
http://nyti.ms/W1E2qK
