Irish People Say: Default! Other Governments Go MAD – Screwing the Future

The Independent writes:

A SUBSTANTIAL majority of the Irish people wants the State to default on debts to bondholders in the country’s stricken banks, according to a Sunday Independent/Quantum Research poll.

The finding that 57 per cent favour and 43 per cent oppose default reflects a growing view among policymakers and opinion formers that the State simply cannot support the debt burden it has taken on.

The telephone poll of 500 people nationwide has also found that a majority of around two-thirds opposes the headline measures in the Government’s four-year plan.

Following Fianna Fail’s loss of the by-election in Donegal last week, the findings will add to political uncertainty as an austerity Budget approaches on December 7.

As Ireland awaited the fine details of the international bailout, which are expected tonight, it was learned last night that the Irish delegation negotiating with the EU-IMF last week raised the issue of default.

“The Europeans went completely mad,” a senior government source said.

Mad? Why? Because it’s THEIR ass that’s on the line, not the Irish’s:

Total foreign bank exposure to Ireland’s economy is $844bn, or five times the value of Ireland’s GDP or economic output. Of that, German and UK banks are Ireland’s biggest creditors, with €206bn and €224bn of exposure respectively.

To put it another way, German and British banks on their own have each extended credit to Ireland greater than Irish GDP. Which doesn’t sound altogether prudent, does it?

As for direct bank-to-bank lending, overseas banks have provided Ireland’s banks with €169bn of loans, which is also greater than Irish GDP.

Here is another illustration on Germany’s banks’ exposure to Irish and other gambles:

Screwing the Future

It is important to understand that government debt is always about screwing the future to enrich connected people in the present:

Ironically, when you look at the political stage, all you will hear in regards to “solutions” to deficits in the end, will be tax hikes. These are not solutions. They are the ultimate manifestation of the very problem at hand. They are, in fact, the precise opposite of a solution. Keep this in mind whenever you hear politicians talk about deficit solutions. Raising taxes to reduce deficits is absolutely and 100% an admission that one has completely failed to solve this deficit problem, and in fact laid the final brick that was missing in the very process of the public’s depredation via deficit spending.

Thus European governments will fight tooth and nail to raise as much money as they possibly can in exchange for promising their lenders and increased loot from increased future theft.

In this particular case it will be Irish taxpayers in the future who will foot the bill.

So long as people cling on to the fantasy of the necessity governments, all this stuff will be so completely predictable that it’s almost boring, and it will continue to go on as I have been pointing out from the very beginning of when this financial crisis started hitting Europe.


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4 thoughts on “Irish People Say: Default! Other Governments Go MAD – Screwing the Future”

  1. I recently read (somewhere) that the Irish public debt was very small, until the Irish private sector got into trouble and the government stepped in. If that is true, it seems wrong to place the blame on government for having so much debt.

    Your argument is, the need for government is a fantasy? Wow. Governments arise. That’s what we see in Waterworld and in the Mad Max movies. That’s what street gangs are. That’s what Bin Laden wants to be. My best mental-picture of “there is no government” is the Dark Age after the fall of Rome.

    Anyway, if the Irish government defaults… doesn’t that screw the “connected people?

    Some differences between us, Nima. Might be interesting to work through them.

  2. I might be missing something, but I fail to see how the private sector is to blame when, as you said yourself, the government stepped in and prevented the necessary correction from occurring. That sounds more like the government is to blame for not letting the market work to me.

    The Irish government defaulting would absolutely screw the connected people … who made a bad investment. That’s the point of an operating market where people are made accountable for their bad decisions. I write about this in detail in What’s the Problem With Government Budget Deficits?:

    The burden of restricted consumption is thus shifted over time from the investor over to the taxpayer. However, the investor made the choice voluntarily, along with all the risk of default which comes with the contract. (In fact, a complete debt default is precisely what the investor would suffer for funding a comparable project on the market, ensuring corresponding and healthy incentives moving forward.) The investor’s time preference and value preference is at no point being acted against. Nothing is violently taken away from him or anybody else. He willingly participates in the transaction.

    The taxpayer, however, never had any choice. He doesn’t necessarily realize that what the government consumes now will be funded by his restricted consumption in the future. Money that would usually have been used to fund the purchases and thus spur production of capital goods (whose employment would increase the production of consumer goods in the future), is now employed in fundamentally consumptive government activities which necessitates that the debts be paid off through the restriction of future consumption lest a default occur.

    Oh, I got muuuch more spectacular mental pictures of “there is no government”! :)

    It involves giant fighting cages in a desert world, sand buggies with Mohawk punks riding around, cats living with dogs, chickens raping Elephants, and I believe Mel Gibson makes an appearance at some point …

    We are all brought up and indoctrinated to fear a world where aggression is universally proscribed as the moral evil it is … because it would lead to aggression, you see, doesn’t it make perfect sense?! :)

    I understand where you are coming from. My FAQ on voluntaryism may (or may not) interest you in this regard as a starting point.

  3. Maybe we both miss something. I say, “it seems wrong to place the blame on government.” You say, “I fail to see how the private sector is to blame.” Fair enough.

    I do not blame the private sector for its debt. I do blame government for the bad economic policies that not only allowed but encouraged the grotesque and excessive accumulation of private-sector debt.

    Your use of the phrase “the necessary correction” is much too casual to suit me. Obviously a “correction” is now necessary, because the problem was allowed to fester for 40 years and more. But I do not trust the outcome if we allow nature to handle the correction. That is how dark ages arise.

    Art

  4. … and I am not suggesting that “nature” solve the problem. There is no such thing as nature, and most certainly there is no conscious and acting being called “nature”. Thus I could hardly propose that a non-existent, non-conscious, merely conceptual thing solve the problem :)

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