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Key still wants to be Ireland

Written By: - Date published: 10:30 am, December 2nd, 2010 - 63 comments
Categories: capitalism, john banks - Tags: , ,

The other week, Lynn and I made fun of John Key’s dream that New Zealand would become the Ireland of the South Seas. Does he still believe we should emulate the Irish? The answer is yes. Key wants to abandon proper process and speed up work on an international financial centre for New Zealand, just like the one that helped get Ireland where it is today.

An international financial centre is kind of like a Thunderdome for financiers. Despite being in New Zealand, our normal rules, especially tax law, wouldn’t apply. You could see this hubs as the ultimate expression of late capitalism – enclaves carved out of nation-states specifically so that the capitalist elite can trade tokens of value that exist many steps removed from the real economy, acting with reference only to the holy ‘laws of the market’ and not the democratic law of the nation.

The Wild West nature of these enclaves spreads into the finance systems of the host countries as financiers move backward and forward between them and wide-eyed locals try to get a cut of the international action. Dublin’s international financial centre was undoubtedly the root of its runaway banking culture that has ultimately brought the country to the edge of ruin.

Why anyone who has seen the last three years of financial disaster would say ‘let’s make our economy more dependent on the finance sector’ is beyond me.

Nonetheless, currency trader and sometime spider fancier Key is determined that New Zealand should follow in Ireland’s footsteps (apparently, he doesn’t think that will result in us coming to the same destination).

And he’s getting frustrated with the pace of officials’ work on the project:

“There’s been a whole series of advice coming from MED which basically says ‘if you want to do this, you’ve got to deliver the Magna Carta of documents’,” Key told the International Business Forum audience.

“‘You’ve got to do all these things and need bipartisan support’ and [so] it goes – on and on and on.”

Of course you need bipartisan support for an international financial centre to work. The banks won’t bother coming if there’s a good chance that the rules will be changed on them in one or four years’ time.

Key went on to say MED’s approach was “absolute rubbish”.

“I don’t need the Magna Carta of documents – just get on and do something – which is why I have told Gerry to deliver me a paper that has zero rating of funds and we’ll work on that.”

MED is the most-pro neoliberal ministry by a long, long way and if even they’re saying ‘hey, let’s do this properly and take our time’, it’s worth listening. But, no, instead the spider fancier has asked the woodwork teacher to slap something together and they’re going to use that as the basis of complex financial policy. As one civil servant was saying to me the other day, Labour goes to the ministries for advice and generates policy from that advice, the Nats go to ministries and say ‘here’s what we’re going to do, make it look justifible’.

Key says “a chief executive of one of the world’s most powerful banks had told him: “If you are prepared to zero-rate foreign funds that are not invested in NZ, we’re going to move $2.5 billion of funds here in two years because you’re 50 per cent cheaper than Australia.”

Let’s break that down.

a) our only competitive advantage, seemingly, would be being cheaper than Australia. That’s hardly a business model that is consistent with closing the wage gap with Australia, is it?

b) $2.5 billion of funds is nothing, less than 5% of the stockmarket’s capitalisation. It’s not a $2.5 billion inflow into our economy, all we get is a fraction of the bank’s fees for managing that $2.5 billion from the banks’ wages and operating costs. This seems to confirm what others in the industry have quietly me – ‘don’t worry too much about a financial centre, Key can build it but they won’t come’.

63 comments on “Key still wants to be Ireland”

  1. This shows Key’s increasing need to appear to have done something. The problem is however that this is more hair brained than his bikeway idea and less likely to succeed.

    • ianmac 1.1

      But if he pushes it through, who carries the risk should it not develop? Buildings, staff, communications?

    • Lanthanide 1.2

      Labour: Working for Families, interest-free student loans
      Jim Anderton: Kiwibank
      Rodney Hide: Supercity
      John Key: Cycleway (pending), financial hub (dreaming)

      Even if he gets the financial hub finished, it still doesn’t stack up against any of those other accomplishments.

  2. Kevin Welsh 2

    As Rowan Atkinson once put it: “Either this man is suffering from serious brain damage or the new vacuum cleaner’s just arrived”.

  3. Tigger 3

    “Key says “a chief executive of one of the world’s most powerful banks had told him: “If you are prepared to zero-rate foreign funds that are not invested in NZ, we’re going to move $2.5 billion of funds here in two years because you’re 50 per cent cheaper than Australia.”

    I hope he got this in writing…

  4. tsmithfield 4

    Marty,

    Cars kill people. Applying your logic we should no longer have cars?

    • felix 4.1

      Sharp as ever I see.

      No, by Marty’s logic we wouldn’t have unregulated cars driving as fast as they like past primary schools at 3pm.

      p.s. you’ve tried this absurd reductionist line of argument here many times before. Are you incapable of learning?

      • tsmithfield 4.1.1

        Marty is being just as reductionist by laying the blame of Ireland’s problems to their financial institutions.

        The problems are a bit more complex than that. For starters Ireland would be in much less of a bind if they were not tied to the Euro and were able to devalue their currency. Secondly, they wouldn’t have had a sovereign debt problem if the government hadn’t rolled over their guarantee to the banks. In a good capitalist system the banks would have been allowed to fail.

        • felix 4.1.1.1

          No, to be as reductionist as you, Marty would need to say “We shouldn’t use money anymore”.

          But anyway, apart from being tied to the euro you reckon we’re in the same boat as Ireland. Goodo.

          • tsmithfield 4.1.1.1.1

            Not being tied to a common currency actually makes a huge difference. In theory, no matter how bad things get, NZ should never have to default on its debts. For instance, in the case of SCF the government could have honoured their guarantee simply by printing more money to pay the bill if they were financially stretched. Ireland does not have that luxury.

            The banking debacle was a symptom of the problem, not the problem itself. The real problem has been for Western countries to fund their lifestyle through excessive debt and a general decline in productiveness. Eventually the bubble burst, as it was bound to, it created huge problems for banks etc as their security (houses etc) plummeted in value. The “solution” has been to cure a debt problem with more debt. This is not a long term answer.

            Marty has conflated the symptom with the problem in his argument. Therefore, it is inaccurate to claim that we will suffer the same fate if we encourage financial institutions to come to NZ.

            • felix 4.1.1.1.1.1

              So we should recreate the “symptom”?

              And that will solve the “problem”?

              Turn it up mate.

              • tsmithfield

                The “symptom” is a bankrupt financial system, not a financial system in itself. Therefore, allowing financial organisations to establish in NZ does not necessarily mean the symptom will occur here.

                • Colonial Viper

                  Did I just see a Natter say that the Government should exercise its sovereign right to issue currency itself without recourse to the use of private bank cash which is debt based and interest bearing?

                  And that the major problem facing Western countries is the funding of unsustainable lifestyles through unsustainable indebtedness, a decline in real economy productivity, and the creation of dangerous asset bubbles (= the free market is not always rational)?

                  Nah, I must be seeing things.

                  • felix

                    Yep you saw it. Now watch him deny it.

                    • tsmithfield

                      You shouldn’t get too smarmy, felix. Afterall, you seem to be having some difficulty in distinguishing a symptom from its cause tonight. Hate to have you as my doctor.

                    • felix

                      Oh I think I could make a fairly confident diagnosis.

                  • tsmithfield

                    I believe in a free market, not a stupid one. And its not just the result of capitalism. Socialist governments have fueled the debt bubble by running large deficits to keep the sheep happy. So socialism has played its part as well.

                    If we can address these imbalances in our own economy then we will have a good environment for financial institutions to flourish. That means treating the problem not the symptom.

                    • Pascal's bookie

                      Because writing the rules so as to keep bankers happy has worked out ever so fucking well.

                      I think we should wait a year or two and see just what further awfulness becomes known about the recent behaviour of international financiers before we roll out the welcome mat.

                      But nah, john doesn’t want a magna carter, just git er done, drill baby drill, what could go wrong?

    • Zorr 4.2

      I fail to see the relevance of your question to the post

      • felix 4.2.1

        Trust me Zorr, it’s not you who is failing.

        • Maynard J 4.2.1.1

          The problem is it’s not cars who kill people, but drivers.

          Whereas it’s not just bankers that broke everything, but their system – i.e. their ‘cars’ *do* kill people, as well as the reckless drivers.

          • Colonial Viper 4.2.1.1.1

            Well the system includes the fact that bankers get huge bonuses for putting all bets on the table at once, risking everything, misrepresenting ‘assets’, and then being able to walk away from the resulting meltdown with all their casino chips still in pocket while WE get to clean up after them using our time and our money.

            Frak it maybe we should all be bankers.

            • Roger 4.2.1.1.1.1

              “Frak it maybe we should all be bankers.”

              Wow. Thats what John Key thinks as well!!!

              This from the Herald article:
              “Earlier reports to the Prime Minister suggested the administration of financial services could become a billion-dollar industry and create 3000 to 5000 new high-paying jobs.”

              Then again he also did say that the cycleway would provide 4000 jobs.

              • felix

                I don’t think he knows what the zeros mean.

                • Colonial Viper

                  “Earlier reports to the Prime Minister suggested the administration of financial services could become a billion-dollar industry and create 3000 to 5000 new high-paying jobs.”

                  Fools, all of you. Fifteen dollars an hour is a high paying job.

                  At least it will be if National gets a second term.

                  LAB has a clear opportunity here. Push the creation of a real tradeables economy. Push the creation of industries where creativity and innovation is not just about creating new bits of paper and thinking up clever ways of getting people to buy them. Remind people how dangerous and fragile it is to rely on big foreign corporates with no stake in your country (e.g. Ireland) instead of developing home grown home based entrepreneurs and start ups.

                  Frankly I think that Brownlee and Key have frakked up big time.

  5. Jeremy Harris 5

    Ireland’s problems (and the problems we’d have) are due to; a monetary system that has a monopoly over the issuing of debt bearing credit, bailouts of failed businesses and deficit spending…

    Low taxes (or no tax) isn’t the issue IMHO…

    • KJT 5.1

      Low taxes having nothing to do with the deficit of course?

    • Colonial Viper 5.2

      Jeremy, Ireland did not engage in deficit spending during the good years. It was prudent with its budgets and ran multiple surpluses just like the good neocons said it should do.

      Ireland must engage in deficit spending *now* because it is neck deep in the shit. It is not in the shit because of deficit spending. The former was not generated by the latter. The latter was generated by the former. You need to get the order of events the right way around.

      As KJT suggested of course low *corporate* taxes are an issue (Ireland has already started raising taxes paid for by *ordinary people*, but has kept their corporate tax rate at 12.5%).

      Low corporate taxes on a crippled economy mean sweet FA tax take to spend. Increasing payroll taxes when unemployment is skyrocketing doesn’t even help to keep water out of the hold.

      Only available solution suggested? BORROW HEAVILY. CUT SPENDING TO THE BONE. TAX THE PUBLIC EVEN MORE. In other words, make the ordinary people who had nothing to do with the neoliberal total disaster pay for the actions of the bankers and the financiers.

      Just remember – every dollar gained through tax is one less dollar which needs to be borrowed.

    • Jeremy Harris 5.3

      Ireland has run surplus for about 10 years, yes, thanks in no small part to the EU, but debt to GDP has always been high because they were spending like drunken socialists for decades beforehand…

      Just remember – every dollar gained through tax is one less dollar which needs to be borrowed.

      Not if reduces economic output, the foreign corporates are there because of those low taxes rates, they employ about 250,000 Irish and provide over half their corporate tax receipts… The article in the most recent Newsweek explains why raising the corporate taxes would be a disaster in the short term…

      • Colonial Viper 5.3.1

        “Drunken socialists” – come on thats a daft right wing meme. As you said they ran 10 years of surpluses and paid off debt – hardly the work of irresponsible or drunk socialists!!!

        And that debt was because they had very bad economic times in the 1980’s with very high unemployment (going back there now). The Government was protecting their people – a quaint concept I know – and that takes money.

        Why use the Debt to GDP ratio especially when you know that a large proportion of that Irish GDP never actually stayed in Ireland. It was simply washed through Ireland by the finance players.

        the foreign corporates are there because of those low taxes rates, they employ about 250,000 Irish and provide over half their corporate tax receipts

        Their foreign corporate tax receipts in absolute terms are too low. Their reliance on foreign corporates instead of localised real industry has proven a weakness. This is what you get for selling off your economic sovereignty. One false move and the foreign corporates pick up and go – no loyalty to you or your motherland.

        By the way, Irish unemployment has skyrocketed from 4% a few years ago to ~14% now. They have 425,000 unemployed and that is after over 60,000 people have permanently left Ireland in the last 12 months.

        So I rather doubt those corporates still employ 250,000 Irish any more. and why would you trust Newsweek to solve Ireland’s sovereign debt crisis? They sure didn’t have any ideas two years ago to avoid it.

        The Irish people are paying for the price of their leaders kowtowing to the bankers and the foreign corporates. Good times while the champagne lasted, the hangover is a killer.

        • Jeremy Harris 5.3.1.1

          As you said they ran 10 years of surpluses and paid off debt – hardly the work of irresponsible or drunk socialists!!!

          Funny how the budget balanced when they moved to the right eh..?

          Well even after the widespread crisis and pain of unemployment the standard of living is much, much higher (than NZ) and than when they were “looking after the people” in the 80s…

          I’m not going to defend all Ireland did, the government’s decision to bail out the banks was a disgrace…

          I don’t trust Newsweek to solve anything, they are a magazine but the piece seemed well researched and thoughtful, the article is dated 4 days ago and gave the corporate numbers and tax receipts, sorry but I trust Newsweek’s figure over your doubts… I forgot you predicted the GFC, what site was that on again..?

          • Colonial Viper 5.3.1.1.1

            And that’s the point: why would you trust Newsweek’s reporting of economist’s figures when it was the economists who were 100% wrong on the GFC. Financial economics is a discipline of no more use than crystal ball gazing.

            Funny how the budget balanced when they moved to the right eh..?

            Hey Ireland did well. I know NZ’ers who moved there and lived there and made a tonne of money. Only problem: it was a house of cards. The nation sized equivalent of an asset bubble. You know when Cunliffe and the Fabian Society talk about a “Resilient Economy”? A picture of Ireland appears under “antonyms”. So yeah, I agree, using the tools of the Right helped initially, then (for the many) it frakin hurt like hell. (The few have kept their mulitimillion dollar casino winnings though – the typical Right Wing casino game, favours the few not the many when it comes time to cash out).

            You know how Mana has empty state houses and people living in garages?

            Ireland does it better. It has tent villages provided by their equivalent of a Dept of Social Welfare. They are for homeless recently middle class but now unemployed Irish workers located outside huge empty brand new apartment blocks built by now-bust property speculators.

            Well even after the widespread crisis and pain of unemployment the standard of living is much, much higher (than NZ) and than when they were “looking after the people” in the 80s…

            Hmmmmmm, perhaps for the few, but not if you are one of thousands of Irish currently living in a tent village or other makeshift accomodation.

            (Bet you are looking at GDP per capita figures to judge a much higher ‘standard of living’ – I told you a lot of that money never stays inside Ireland for more than a few moments, its a money washing centre for Google etc).

          • Jeremy Harris 5.3.1.1.2

            So you discount all economic theory now..?

            How about Climate Science..?

            • KJT 5.3.1.1.2.1

              No. Only “free market” give to the rich theory which only works for the cheats.

            • Jeremy Harris 5.3.1.1.2.2

              Imagine my suprise KJT…

            • KJT 5.3.1.1.2.3

              Jeremy. You shakily follow one set of economic hypotheses and accuse us of abandoning economic theory.

              From your writings you believe all taxation is theft. I forgot! it is fine when you want police to protect “your’ wealth.

              You believe in Noblesse Oblige for welfare provision. That worked so well in Russia that even Stalin was considered an improvement.

              You follow Milton Freidmen and the Chicago dries hypothesis. (Not theory because the real world evidence has shown it to be false).

              De-regulating and cutting the State sector in your favorite country..
              Worked beautifully in the 1880’s. They called that one the long depression.

              After that they had extremely high taxes for the wealthy in the USA and the State spent heavily on infrastructure. They called that the USA’s golden age.

              After the war the “free market” virus struck again. Union bashing and again reduced taxes and privatisations. It was so bad we just call it the depression.
              I will not get to complicated for you but it ended with FDR’s new deal. Increased State spending and taxation. There was a dip after that when the US wealthy got FDR to take a tea break.

              Then the USA had years of prosperity and protectionism until Freidmen and co in the early 70’s. Sharply reduced taxes for the very rich. Lessening of State spending. Banking de-regulation (Notably the removal of the Glass Steagal act, foreign exchange rules and regulation of derivative trading.
              The USA has gone downhill ever since with decreasing employment and increasing deficits. The most expensive health system on earth. The most expensive and one of the least effective education systems. Public bailouts of the private sector.

              Not to mention the other followers of you “theory” Ireland and the UK.

              Starting to see a pattern here Jeremy.

              As it was working so well in the USA to transfer the products of working people to the very rich. Douglas, Richardson and co decided to follow suit.
              I was a bit puzzled as to their motivations for a while until I heard a trawler Skipper say “Get it first before someone else does because it is all going to go anyway”.
              Describes the actions of the worlds wealthy to a t.

              How about you study some economic theory. Keynes. Adam Smith. He has some funny ideas to you guys, like a labourer is worthy of his hire and the owners of capital should pay the taxes. Not just the bit RWNJ’s like to quote about the invisible hand.
              Ricardo. Who had reservations about the invisible hand and his own theory of comparative advantage..
              Management philosophy like that of Henry Ford and Peter Deming (Here are some “right wingers”) will surprise you.

              At the end of the day you are trying to justify your own guilt at having so much un earned money.

            • Jeremy Harris 5.3.1.1.2.4

              From your writings you believe all taxation is theft.

              I haven’t said that, I believe it’s force and that government force should be minimised…

              In fact you do so love to make things up, including your “real world proof”… See:

              accuse us of abandoning economic theory.

              I didn’t accuse you of anything, I asked CV if he had due to his statement:

              Financial economics is a discipline of no more use than crystal ball gazing.

              You answered a question not directed at you about a statement you didn’t make…

              The rest of your post is just nonsense and bears no resembalance to reality, the UK is practicising Capitalism, really..? When 53% of their economy is run through the government and they have a an unsound monetary system..?

              I don’t think you have any clue what the basic tenents of Austrian economics are, see:

              1). Only individuals choose.
              2). The study of the market order is fundamentally about exchange behavior and the institutions within which exchanges take place.
              3). The “facts” of the social sciences are what people believe and think.
              4). Utility and costs are subjective.
              5). The price system economizes on the information that people need to process in making their decisions.
              6). Private property in the means of production is a necessary condition for rational economic calculation.
              7). The competitive market is a process of entrepreneurial discovery.
              8). Money is nonneutral.
              9). The capital structure consists of heterogeneous goods that have multispecific uses that must be aligned.
              10). Social institutions often are the result of human action, but not of human design.

              No policy is inherently Austrian or not, obviously property rights derive from 6 but there is a difference between the libertarian view of property rights and accepting some measure of the US idea of emminent domain… So called Austrian policies are individuals interpretations of the basic principles… Yet you accuse me of economic ignorance…

              At the end of the day you are trying to justify your own guilt at having so much un earned money.

              I’m proud of my father and the jobs and products he’s created… He is an excellent positive role model, so why wouldn’t I want to follow his example..? Why should I abandon the pursuit of a hardworking, happy, wealth creating life due to the nonsensical online rantings of an envious, hate filled, little man..?

              • Pascal's bookie

                How well respected are the austrians within the discipline of economics, he asked, innocently.

                If I was to study economics at any given university through to phd level, would I need to read Mises? Would I be likely to spend much time on him? If I suggested something novel in a tutorial, would,

                “But that contradicts Mises!”

                be a conversation stopper, or a joke?

                Is he actually relevant to economics as it is, or he more commonly cited in the nonsensical online rantings of envious, hate filled, little men, I wonder.

              • KJT

                I am answering your continuous rant in many forums I have seen in justification of your own unearned privileged position and your support for “Free market” economics.

                I am ranting because I am so disgusted at the mess people with your “dog eat dog” view of the world are making.
                .
                You want to condemn many people to poverty with your “free market’ dysfunctional economics. You are among the people who are stuffing up the society that a lot of us have put effort into making functional. People like you now look like they have not only stuffed up millions of peoples lives, but will now make the world un-inhabitable.

                http://www.nytimes.com/2010/09/03/opinion/03reich.html?_r=3&emc=eta1&pagewanted=all

                http://foodfreedom.wordpress.com/2010/07/07/how-goldman-gambled-on-starvation/

                If we followed your prescriptions for society we would not have one.

                Where do I mention the Austrians? Even more cloud cookoo land than many economists.

                I am not saying anything about your father. He may be all that you say, which would make him the same as me. Well off, due to hard work and a bit of luck.

                Unlike you, I do not want to pull the ladder up after me to make sure others do not have equal opportunity, just so I can pay less tax..

                Funny all the free market types do not move to countries where the market is truly free.

                • Jeremy Harris

                  That is nonsense KJT, in the 1950s HK had 1/3 the wealth per capita the UK had… Now it is a full 1/3 higher… I support trade and economic liberalisation and low tax rates because it works, because when followed for long enough the poorest people in society have a much higher standard of living than if socialism had been practised instead…

                  I have no interest in pulling up any ladder up after me, I was born in the early 80s so according to you Douglas destroyed the ladder when I was about 2…

                  • Colonial Viper

                    That is nonsense KJT, in the 1950s HK had 1/3 the wealth per capita the UK had (1)… Now it is a full 1/3 higher… (2) I support trade and economic liberalisation and low tax rates because it works(3), because when followed for long enough the poorest people in society have a much higher standard of living than if socialism had been practised instead (4)…

                    I have no interest in pulling up any ladder up after me, I was born in the early 80s so according to you Douglas destroyed the ladder when I was about 2…(5)

                    1) Where is this statistic from? Are you surprised because at the time the UK was still a long standing empire and Hong Kong only decades before had been largely swamp and jungle?
                    2) Today this is largely because Hong Kong is part of *China* a country which does not believe in free markets for its currencies or its assets. On the other hand the UK was impoverished by the banks after WWII then it believed that free financial markets would be its saviour in the 2000’s when in fact it turned out to be the reverse.
                    3) Where does it work? Who does it work for? Because real wages in the US have stagnated since 1980, even though the top 1% of the population are now far far richer.
                    4) If its followed for long enough? Sorry mate *where* was it followed for long enough? If you need to follow the neocon recipe for a long and undefined period of time before success how do you know that success wasn’t just a fluke and free markets had nothing to do with it? Why is this not just praying faithfulness to the alter of the neocons – some kind of economic cargo cult? Do as we say and we promise it will get better one day, some how.
                    5) Douglas slashed the ladder down to size. Now what is being left is being weakened and stripped. By the way, those born into wealthy families don’t need the ladder, they already have wealth to support them on the way up.

                  • KJT

                    Explain to me Jeremy, how in the countries closest to your ideal, the poor are a lot worse off than in the countries closest to mine.

                    Would you rather be poor in the UK, USA, Columbia, Somalia (There is a totally free market state for you) or Denmark?

                    “Been followed for long enough”. Because the failure becomes so apparent the State has to step in and bail out the private sector.

              • Colonial Viper

                Classical financial economic theory is bunk. Rubbish. Bull shit.

                In Jun 2008 the Reserve Bank was considering increasing interest rates to tamp down inevitable inflation due to expected excess growth. In Sep 2008 NZ was in recession.

                Its a laugh Jeremy, like crystal ball gazing or having your palm read. Do it for a joke, light entertainment, whatever. Fine. Just don’t bet your life or the life of your people on advice from an economist (or even a team of PhD economists, like AIG had).

                Classical financial economists have tried to make out that their discipline is as methodical, scientific and rigorous as physics or mathematics when in fact it is good for entertainment purposes only. Here’s an amazing thought: the most successful economies in the 20th and 21st centuries have never ever let unregulated free markets simply fly. They have all tilted the playing field in their favour with Government procurement, market protections, subsidies, currency controls, special rules and tax schemes for favoured industries.

                As for your ten Austrian commandments they are bunk.

                No successful economy follows them or refers to them.

                They didn’t help predict the GFC nor are they helping us get out of it. The bankers and the capitalists don’t care about them because they aren’t helpful to tilting the field in their favour and to creating pseudo-monopolies.

                I wonder why you still hold them in such regard.

                And in case you need to ask again what my position is:

                Classical financial economic theory is bunk. Rubbish. Bull shit. Good for light entertainment only along with a few beers.

  6. some great footage of the Irish crisis and the unions and student response to it compiled here-
    http://socialistaotearoa.blogspot.com/2010/12/ireland-on-edge-revolution-televised.html

    and some personal thougths and a photo story from before the IMF Collapse here-
    http://socialistaotearoa.blogspot.com/2010/10/ireland-toletarian-state.html

  7. Bored 7

    Seems to me the only reason Key wants us to be like Ireland is that the government there has taken on a bail out of a rotten financial system that saddles every man woman and child with $000s each of debt. The rich of the private sector, in particular finance have had their arses and wealth saved at the expense of ordinary citizens. This is why Key wants us to be like the Irish, so that he and his fat cat cronies can walk away with the cash and have an enslaved populace beholden to them.

  8. This snip in from a friend
    Sorry for the past
    Ireland must consult the IMF and European authorities over any major change to its economic policy, according to documents disclosed Wednesday outlining details of the country’s international bailout.
    Finance minister Brian Lenihan said Ireland had also been set quarterly targets for its recovery under the deal for up to euro67.5 billion ($89 billion) in international loans.
    The documents show the country had promised to take “any corrective actions” necessary to fix its ravaged economy in order to win the deal.
    “We have been through a traumatic two years. Of course we would have preferred to avoid to resort to external assistance, but we can emerge from it a stronger and fitter economy,” Lenihan told Ireland’s parliament.
    After making the documents public, Lenihan said the bailout “requires the government to consult with the European Commission, the European Central Bank and the IMF about the adoption of policies that are not consistent with this memorandum.”
    The documents show that every week government departments will supply regular data on the state of Ireland’s finances to authorities offering the country loans.
    Under the deal, Ireland has pledged to sell off its stakes in the country’s crippled banks “within the shortest timeframe possible.”
    Prior to the bailout, Ireland had already committed at least euro45 billion to bailing out five banks. The deal provides an immediate euro10 billion to inject into the cash-strapped lenders.
    “The reason we had to seek external assistance is because the problems in our banking system simply became too big for this state to handle on its own,” Lenihan said.
    However, he told lawmakers they would not have a chance to vote to approve Ireland’s acceptance of the bailout. “These supporting documents do not represent international agreements and do not require the approval of the Dail,” he said, referring to the country’s parliament.
    Critics have charged prime minister Brian Cowen with meekly accepting a deal which is too costly — Ireland will pay an average of 5.8 percent on its loans — and which they say prevents future governments from altering key elements.
    Ireland will hold elections early next year, when Cowen’s Fianna Fail party is expected to be ousted.
    Lenihan said the government had no option but to accept the terms. “Without this program, our ability to fund the payments to social welfare recipients, the salaries of our nurses, our doctors, our teachers, our (police) … would have been extraordinarily limited and highly uncertain,” he said.

  9. so the gov’ts bail out the banks cos they cant afford to let them fail. if they fail, then the rich have all their wealth wiped out and the bankers become unemployed…is that how it works ?

    then what ?

    the banks call in the loans the gov’ts got to bail them out forcing them to tax the poor to pay for the bad loans ?

    can someone counterfactualise what would have happened if the banks had been allowed to fail ?

    • Colonial Viper 9.1

      can someone counterfactualise what would have happened if the banks had been allowed to fail ?

      Question par excellence. I suppose the answer could be divided up into 3 parts. Effects on Main St. Effects on Wall St. Effects on Government (State and Federal). (Sadly I do not have enough knowledge to speculate).

      Also the banks could not simply be allowed to fail fullstop letting the chips fall where they may, there would need to be a plan to swing into action as failures occurred. I’ve never seen any proposal , even speculative, of such a contingency action plan.

      There were two tools which I thought the US should have used.
      1) Debt moratoria. Specific debts should simply have been cancelled – e.g. the quantities owed reduced by one half or by 100%. Who would be upset: anyone who was a net owner of debt (i.e. the wealthy in the US and also wealthy foreigners), because their asset base (of debts) would be seriously eroded.

      2) Nationalisation of financial structures of value. Want to stop bankers bonuses for all time? Want to force their break up? The US Govt should have demanded a large shareholding in Goldman Sachs and seats on the board of directors for their US$12B plus in bail out cash. The US Govt pumped AIG full of billions and took an 80% share in it. But AIG has frak-all value. A lot of those bail out billions given to AIG went straight into investment banks like Goldman Sachs.

      Further I think that shareholders and bond holders in those firms should have taken huge haircuts or been wiped out. No way should they have been treated to a South Canterbury Finance where investors get not just their capital back but interest as well, paid for by the all suffering tax payer.

      Government backed compensation schemes could have been implemented for ma and pa investors.

      The Government would have to take steps to ensure that basic banking services to Main St were not interrupted.

      • vto 9.1.1

        There is a member of one of the world’s banking families most responsible for all of this, a spoiled brat 30-something Rothschild, out at Hickory Bay on the end of Banks Peninsula, if anyone felt like putting these things to him personally. After all, it is highly personal to each of us.

        This is well known public knowledge btw.

        He should just f… off.

      • Jeremy Harris 9.1.2

        I’ve never seen any proposal , even speculative, of such a contingency action plan.

        Bankrupcy and High Courts… Liquidators… Companies have been going tits up for hundreds of years, we have a well worn system for the orderly cessation of them…

        • Colonial Viper 9.1.2.1

          Ah of course Jeremy. “Orderly cessation” thats it.

          So can you tell me what the courts and the liquidators appointed by major creditors (foreign central banks and other investment banks) will do when ten million pensioners can no longer access their company super funds because the investment bank managing the fund’s assets has gone under?

          How many old people starve or lose their homes in the months before the receivers sort out the situation?

          • Colonial Viper 9.1.2.1.1

            Oh and by the way, those foreign pensioners might not even live in the same country as the failed investment bank, they might be pensioners who are nationals of many different countries around the world.

            So how is that going to be managed in an ‘orderly’ fashion then?

          • Jeremy Harris 9.1.2.1.2

            Sorry so you support the bailouts now..? You support the public funding of the banksters and the cutting of public services to keep the capitalist ponzi scheme going where the rich rob the poor..? etc, etc

  10. felix 10

    You know what?

    If John Key were around in the 13th century he would’ve held exactly the same view of the actual “Magna Carta of documents”.

  11. Irascible 11

    Roger, Nosferatu, Douglas had this idea when he was finance minister in the Lange govt. He got laughed out of court by all those advice was sought. Key is trapped in a mind set from the mid 70’s on this policy event… if he can’t recall 1981.. he obviously won’t be able to recall how sceptically the Douglas back-office Finance hub was greeted both nationally and internationally.
    Credibility out the window again for Key…. mind you he might be looking for a job opportunity for Pansy Wong and company.

  12. john 12

    Ireland’s NeoLiberal party has led to financial disaster for ordinary people.
    refer link:
    http://www.commondreams.org/view/2010/12/01-9

    “Capitalists maximize profits when they create bubbles that burst. They profit during the upswing and the crash…its called market timing and those who control the markets profit handsomely. Capitalists who control markets AND governments get the added bonus of taxpayer funded bailouts if their timing is less than optimal.(South Canterbury and Equitable Mortgages)

    Capitalists hated Franklin Roosevelt because he created a unique 50 year period where regulations controlled the magnitude of bubbles, thereby limiting the profits of capitalists. Remember that era when uber capitalists had to share their yachts and personal aircraft with their kids because they couldn’t afford to buy each kid their own yacht and aircraft ? Capitalists will do whatever it takes to assure that such regulations are never again imposed.”
    “the irish people should replace their neo-lib political leadership with the true lefty group and

    renege the conjured-up debt, and walk away from the EU.”
    “The ugly face of Milton Friedman’s free market monster has surfaced again in the land of my heritage. I fear the only time this will stop is when these maniacs run out of things to steal.”
    “but where in the world does anyone come up with 100 billion euros for this tiny nation; the whole population is just a little bigger than Chicago. Ten billion wasn’t enough? Fifty billion?

    Your conclusion, “The poor pay for the excesses of the rich.” is priceless.”

  13. How about this:

    John Key is a Wall street banker, has been for the last 20 years before he came home and has been while posing as our PM. He was send here to do exactly what he is doing; opening New Zealand up for the final shakedown of its population while charming the pants off the venal, narrow minded, angry, Pakeha middle class just before his mates come to kill them off.

    No surprise there as they have done is in every other country around the world. Here is an interview with what he loosely calls himself an economic A href=’http://www.democracynow.org/2004/11/9/confessions_of_an_economic_hit_man’>hitman . Here we didn’t need one we voted him in. That’s how stupid and uninformed the general population is. They still think the kingdom gives a fuck.

  14. randal 14

    the thing about money is you cant actually eat it.

    • prism 14.1

      There’s a project for a clever entrepreneur. Potato starch is used for quite strong carry bags, so edible money when all else fails and particularly if inflation is rampant would be a famine preventer. Anyone for nice potato soup with a faint soupcon of ink?

  15. The Baron 15

    I’ve said this before and I’ll say it again – I still wanna be like Ireland too.

    A 30% downturn is disasterous – but a hell of a lot worse than spinning our wheels for the last 20 years, as the stats below show:

    http://www.wolframalpha.com/input/?i=new+zealand+ireland+gdp+per+capita+1990-2010

    so where would you rather be? 30% down on twice as much? or where we are now?

    • Colonial Viper 15.1

      Thanks Baron, I always wanted to know the silver lining to having 425,000 unemployed in a similar sized country to us, and where over 60,000 people have left the country permanently in the last year alone.

      And hey, I can’t believe the Right Wing has such bad economics knowledge.

      You know that a large proportion of Ireland’s GDP was simply foreign money washed through its low tax financial system? Those figures you link to say nothing about how much of that economic activity actually stayed in the country to build value for the citizens and the sovereign (not much).

      In fact because it was all so highly leveraged they’re now fraked.

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  • Speech to Labour Party Congress 2020
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