27 November 2010

Just Say 'No'

The Irish State faces a historical moment. In keeping with its tradition of courageous struggle for freedom and justice and the unique role that Irish people and culture have played on the world stage, Ireland can now be the country that stands up against the bullying forces of the financial markets. The morally unacceptable terms it is being offered mean that any other response is unthinkable.

The bond traders responded to Merkel's attempt to constrain their profiteering by downgrading Irish debt - thus raising the income they gain from it - increasing the costs imposed on the Irish state, and crucifying the Irish people. It is time for a proud nation to say no: default is better than humiliation.

Such a strategy will also turn the tide. Since the break-up of the euro nwo appears inevitable Ireland could be a player in the end-game, rather than a victim. The plan of the financial interests is to pick off one Euro country after another. This is similar to the financial contagion that began in South-East Asia in the 1990s, but with the added appeal that, as each country falls, Germany will pay off the traders. Ireland's default would signal the end of this process and force a political solution on the Eurozone. If Ireland does nothing Germany will come under increasing pressure itself to abandon the euro and create a new currency, leaving the smaller nations of Europe in turmoil.

And here is one I prepared earlier. All EU states should simultaneously suspend trading in their national debt. They should then agree interest rates that they are prepared to pay on their national bonds over a 10-year period. These rates would vary to reflect the nature of the economies involved, but only within narrow bands, and at much lower rates than are being paid today. New dated bonds with fixed returns would be issued up to a percentage of current holdings.

States would thus retake the power over their national economies. Traders could accept the terms or lose everything. Their game of extorting the value of national economies through pressurising their politicians would be finished.

This radical political move would clearly have serious implications for the other global currencies, and especially the dollar. But it would bring the interests of citizens back into play and increase the pressure for urgent negotiations to establish a new global financial architecture which serves people rather than financial interests.


  1. Assuming that's a viable option (and I'm not convinced it is) wouldn't that just encourage countries to put off reforms and sink further into debt and uncompetitiveness? You're essentially arguing that interest rates should be what the borrower thinks is appropriate, not what the lender is willing to accept given the amount of risk involved.

  2. courageous struggle for freedom and justice?

    like remaining neutral during WW2 and de valera signing the book of condolences when Hitler died?

    mmm... not how I see it

  3. I'm encouraged that the bond holders will lose out. Even though recommendations from Automatic Earth were bonds were the safest place to put your money (they may still be!). As you say this should stop one country after another being brought to its knees. But I can't see how EU countries can just stop trading their national debt, but my understanding is limited I admit. Even under Con-Dem austerity measures the debt is still growing. Wouldn't stabilising it immediately mean more austerity?

  4. Great blog, glad to find it happy to see you're a Transitioner too!

  5. I think the debt cycle is being played out before our eyes. They are saying it is not about individual countries now but is in fact a global systemic issue (hence the reports that America will bail out the ECB if needed). That's encouraging as it sounds as if people are waking up and questioning some real fundamentals.

    Its all just printing money and short termist, delaying the inevitable working out of the mathematics at play. The markets are skewed by this QE going on across the board and so are increasingly detached from reality (more so than usual anyway)

    A global approach to dealing with the fundamental flaws the the debt based financial system is the only response I can see that will allow us to move to a new system with as little fallout as possible.

  6. "Assuming that's a viable option (and I'm not convinced it is) wouldn't that just encourage countries to put off reforms and sink further into debt and uncompetitiveness?"

    The 'reforms' involve removing all forms of social security and even basic government provision of services for it's citizens to satisfy finance capital and the rentier class who actually created the problem.

    Why are countries in debt? Is it because corporate and high margin personal tax rates were slashed from the 1980s onwards meaning less income for the government? If I'm not mistaken, the UK deficit was around £39bn prior to the financial crisis. After the government bailed out the banks, the deficit jumped to £149b, relatively low historically. Now the government are ensuring the general population pay for a crisis emanating from the banking sector (while those banks, their top earners and major corporations don't pay any more tax and can purchase private services such as healthcare).

    Why should countries compete with each other economically? That whole idea is part of the false discourse of globalisation, which many academics (cf Hirst & Thompson 1999, Ellen Woods 1997, Rosenberg 2000) claim isn't an empirical reality (with periods of economic interconnectivity having been seen in earlier historical eras) and where it can be said to have made a difference, can be controlled by states/governments if they so please.

    Talk of economic competition is a means for governments and the ruling classes (generally finance capital) they represent to justify policies which attack the welfare state, social spending and the rights of labour in general.

    Globalisation is the 'glint in every capitalist eye, helping to tie workers to their employers at the expense of their international comrades' (Wills, 1998).