October 1, 2023

What Are The Alternatives To This Economic Disaster? (Sunday Indo 12 Sept 2010)

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On numerous occasions in the last week we have heard our Minister for finance Mr. Lenihan remind us of the necessity to continue to guarantee the banks. Not to have done so initially would almost certainly have meant the instant financial collapse for our state. Of the two options open to him (letting the banks go, being the first), guaranteeing the Irish banks was the only practical option. Well, according to those who were advising himself and Mr. Cowen on that fateful night, when the crises meeting took place in Government Buildings.

Let’s face it, this is what he was told by the CEO’s and the Chairmen of Allied Irish Banks and Bank of Ireland. And these people should know shouldn’t they? These were the same people who, we had been led to believe, understood international finance, economics and the creation of wealth. After all, the bankers were finance professionals and Mr. Lenihan and Mr. Cowen, were legal professionals. You wouldn’t go to a solicitor for financial advice nor vice versa, would you? Our representatives at the meeting (Zig & Zag) were either lied to or they were incompetent, or both. Fortunately for everyone in the room that night, we’ll never know as there were no minutes taken at the meeting. Yeah, right.

We can only surmise that the bankers put up an extremely strong case for the guaranteeing of the banks and strangely Anglo Irish bank, which they knew was in serious trouble. The problem is, Mr. Lenihan has ever told us what, specifically, the alternatives were. Sure, we have heard the warnings of “economic meltdown” and “imminent collapse of the financial system” etc etc. But so far, nobody has actually told us what these mean. What advice specifically did Mr. Lenihan and Mr. Cowen receive from the bankers? What “appalling vista” lay before them that left them with no choice but to guarantee the Irish banks and therefore a generation to economic hardship? I, for one, would really like to know the answer. I mean, how bad would the alternative have been?

Would it have resulted in the highest unemployment rate in the history of the State? Or have meant the prospect of five or six consecutive budgets which would have crucified the ordinary hard-working citizen? Or the state having to borrow money at a higher interest rate than Iceland? Or, a lifetime on the dole? Or emigration?

From where the vast majority of people in this country are sitting, the one in nine children who will go to bed tonight hungry due to poverty, the 453,000 people who have to face another week of feeling worthless or the small business starved of working capital, we are already living at the start of what is an economic meltdown. Make no mistake about it, the way things are now is only the start. Under the government’s present budget plans we will have to cut our day-to-day expenditure by no less than €40 in every hundred compared to what is presently being spent. And that is only to get to the stage where we are spending what we are bringing in!

The people who got us into this mess have skillfully avoided the feared financial collapse, and instead we have economic meltdown. You see, a financial collapse would mean those with finance would stand to lose. And if there is one thing we have learned, it is that whatever else happens, that can never be allowed. The economic meltdown means simply that the cost will be borne by every one of us regardless our ability to pay. Is it just me or does that seem very unfair? When the profits were being made by the few it was capitalism at its best, but given the scale of the capitalists losses our Government has reverted to socialism and it will mean losses for the many.

I wonder whether or not Mr. Lenihan and Mr. Cowen were informed by the bankers, at the now infamous late night meeting, as to the value of Anglo Irish bank bonds they held (Bonds are effectively IOUs)?  Was the Minister aware that in the week preceding the meeting, Anglo Irish bonds were changing hands on the financial markets at a 40% discount? For example, if someone had a bond or IOU from Anglo Irish for €100 million they were willing to sell it for €60 million, because of the risk associated with Anglo Irish defaulting. The amazing thing is that as a result of the heads OF both Allied Irish Banks and the Bank of Ireland pushing for and succeeding in the inclusion of Anglo Irish in the bank guarantee, any bonds which they held prior to the meeting went up in value by 40% overnight. And guess who makes up the difference? That’s right, you and your family.

In this country like so many others, we have government departments to oversee areas of Irish society which are deemed so critical to its success that they must be handled by central government and more importantly be not for profit. That is why have a Department of Education, Health, Agriculture, Trade and Industry etc. These areas are deemed so vital for the welfare of the people of this country that no commercial organisation can be allowed to dictate the strategy or policies in relation to them. It seems incredible to me that there is not one economy in the Western world which has a government Department of Banking.

Why is it, that something so absolutely central to the welfare of every single citizen of the state is left to a bunch of greedy, selfish, dishonest, self serving executives? Dishonest, I hear you ask? Well this is what Mr. Lenihan referred to the senior bankers as, twice in the last week. Once on the excellent RTE 1 ‘Freefall’ program (tomorrow night at 9:30, a must see) and again on NewsTalk 106 FM, last Thursday morning. And yet, he is still taking their advice?

Mr. Cowen and Mr. Lenihan are decent honest men who have devoted their life to Fianna Fail (1st), their country (2nd) and if my personal experience of a political upbringing is anything to go by, their families (3rd). There is no doubt that they have done their very best to steer us through this difficult time but clearly, their best is simply not good enough. We are simply not going to accept their present proposals to deal with the banking crisis until, at the very least, they tell us specifically, what alternatives they have considered and the actual implications for each of us if they were to pursue a different course of action. We are not stupid and we can handle the truth but first, we must be given it. Maybe it’s time to discuss the pensions issue while they’re at it.

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