Irish Liberty Forum

As World War II raged, an amazing thing happened in Irish politics. According to Wikipedia’s entry for Seán T. O’Kelly:

O’Kelly was appointed Minister of Finance in 1939. He secured the passing of The Central Bank Act in 1942.[4] On 17 July 1942 at the fifth and final stage of the Dail debate on the “Central Banking Bill”, he argued that the owner of the credit issued by the Central Bank of Ireland, should be the private property of the joint stock banker and not the property of the people of Ireland. This debate was carried out when only five Deputies were present in the Dáil.

But how did the question of “credit” even arise? It arose thanks to James Dillon, TD for Donegal West, who made a remarkable contribution, including what follows:

“There are two methods of rebutting the contention that credit money here belongs to the Irish people. One is the method of denying its existence, and that, as I understand it, is the position of the Leader of the Opposition. The position taken up by the Leader of the Opposition and by those who think with him is that a banker lends the money of his depositors and shareholders and nothing else, and that, therefore, the public have no concern with the activities of a bank, other than their personal dealings with it.

I propose to submit to the House that, far from that being true, the day the banker gets established, the least of his business is the lending of his money or that of his depositors and shareholders, that that represents only one-tenth of his activities and that the remaining nine-tenths of his total activities consists in lending and dealing in a commodity called credit money which he creates on the strength of the fact that he is functioning in a community consisting of law-abiding men who maintain, by their several individual exertions, a stable community.

This conception is so revolutionary to many persons who have never given any study to banking that a large number of people, without examining the evidence, simply throw their hands in the air and say that it could not be true; but the astonishing fact is that it is true, and, by the mercy of Providence, these facts were made manifest and placed forever on record in the evidence of the Committee on Finance and Industry which sat under the chairmanship of Lord MacMillan in 1931, and the minutes of whose evidence have been reported.”

Everybody should know that Nobel prize winner and archetypal mainstream Keynesian economist Paul Krugman was demanding a housing bubble in 2001 and 2002.

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

The little problem that the economics profession won’t face up to yet is that Keynesianism has been dead wrong from its very conception. The urgent task for everybody else is to stop these people from inflicting their policies on us for any longer.

We’ve got new central bank figures:

Monthly statistics from the Central Bank show the first net fall in mortgage lending since 1990. The figures also show a sharp fall off in credit card spending…

It is the first time that repayments on existing mortgages has been greater that new mortgage lending since the Central Bank began this monthly statistics series in 1990. The figures show that, overall, mortgage lending fell by over €100m last month.

Contrary to what most people think, deflation is a good thing. Under a free market monetary system, this imaginary digital “credit” would never have been brought into existence in the first place. As loans are paid in faster than they are being created, with the most speculative loans already in a state of default and evaporating from the system entirely, the money supply more closely reflects that which would prevail in a deregulated, decentralised system (however a pale imitiation it might be).

What’s been lacking from the debate on the proposed Irish blasphemy law is any framing of the discussion in its proper context: property rights. Once we do this, the correct criticism of the law becomes clear.

We begin by noting that all communication has a physical form, a form which is always the property of some agent. Read the rest of this entry »

It’s a sign of the times that every public debt offering in Europe has become a “risk event”, with the Irish government among the most vulnerable to what would be a catastrophic collapse in demand. And no longer empowered to produce its own counterfeit money, it is ultimately reliant on the ECB to remain solvent.

The Sunday Independent reports that the ECB has finally started to play ball, providing the funds to ensure that no Irish government bond is left unbought:

Irish banks are using billions of euro from the European Central Bank (ECB) to buy up Irish government debt, the Sunday Independent can reveal.

It has emerged that the banks were “active” in a recent Irish government bond sale of about €1bn, and it was confirmed yesterday the repossession of Irish bonds at the ECB has occurred.

Irish banks are using ECB funds to “create the illusion” of demand on the international markets.

Incidentally, how reassuring that the same governments who collude in this type of activity are fighting the good fight against market abuse by private participants, defined previously here:

Market abuse may arise in circumstances where investors have been unreasonably disadvantaged, directly or indirectly, by others who:

* have used information which is not publicly available (insider dealing);
* have distorted the price-setting mechanism of financial instruments;
* have disseminated false or misleading information.

Of course, the governments themselves would never do anything like that.

Hat-tip to cyberianpan for bringing our attention to the following story in yesterday’s Times. While the gist of the article was unsurprising – public sector employees demanding time off work for spurious reasons – there were some small details which were genuinely shocking, and in particular this one:

Staff at Leitrim county council also won a Labour Court case last month, forcing management to give them time off to attend a non-existent festival.

Management had sought to cancel a traditional half-day to attend a local regatta after it was discontinued due to the worsening economic climate. But Impact argued the annual festival leave had been an entitlement to employees for many years and there were “other festivals” staff could go to.

I can attest to the deeply ingrained culture of laziness, mediocrity and stagnation within these councils. The excellent members of staff who do exist within their ranks are unfortunately no match for institutions where customer service is the lowest priority, and expanding entitlements the highest.

Things wouldn’t be quite so dire if the unions didn’t bring every petty complaint in front of the Labour Court. But it’s inconceivable that behaviour like the above could continue for any length of time if the Councils’ monopolistic, taxpayer-funded privileges were revoked.

Two of my favourite Youtubers, visionvictory and george4title, teamed up recently to produce an amazing mini-series, on the ground, about the housing depression in southern California. How long until scenes like this come to Ireland? Or maybe they’ve arrived already?

Thanks to Cavok at politics.ie who brought our attention to the latest industrial production release by Eurostat, in which the Irish figures for January and February 2009 are the only ones listed as “Confidential”. Who made the decision not to release the figures, why were they not released,  and can we assume that Ireland’s annual variation figures are worse than Latvia’s -24%, or Estonia’s -30%?

There is a new blog about the Irish economy by a very impressive list of professional economists, which I’m sure that many of you have been following. It’s definitely a blog worth keeping an eye on.

One post that I noticed recently, “On German Concerns About US Monetary Policy“, contains too many interesting points for me to deal with in one post, but I would like to focus on one simple idea and see if my analysis can add to the conversation. The question is: are central bank asset purchases inflationary? And what about loans? I will write generally about my understanding of some important effects of money creation. Read the rest of this entry »

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