(Originally Published on Corkstudentnews.com in June 2010)
Economics has always bored and intrigued me at the same time. The use of almost indecipherable lingo and seemingly huge figures turned me off instantly but despite this, I always tried my best to keep abreast of things, how they were developing and who was trying to screw whom. This seems to be kind of odd in Ireland, maybe Ireland is the exception, as most people couldn’t care less about the economy and the vagaries that go along with it. This changed however once people’s livelihoods were threatened and rightly so.
I am not saying that I am an expert on all things economic but I do have a solid enough grasp of economic policies and an even better grasp of history to realise that our country is not standing at the edge of a precipice, but it is only barely hanging on to the edge with one hand. Unless something changes and changes quickly, we will fall into that almost bottomless precipice and we will not reach the end for maybe 10 years. An entire generation of people have been and are being forced into economic slavery. Is this the path that we really want to go down?
Without NAMA the country would go under. This is what we have constantly been told since its formation last year. It’s a pity that this is an unadulterated lie and obfuscation. The real purpose of NAMA is not to “save the country” but is a get out of jail free card for the developers and the banks. The government and the above mentioned are one cosy cartel that has been in cahoots with each other from the very start. A developer makes a donation to a politician or his party, the politician gets the land rezoned for development, the bank lends the money to the developer with little or no conditions, the developer builds on the land and sells the units off at a massively inflated price and hey presto, everyone is a winner. Everyone wins; apart from the average person on the street that is. You cannot think of the 3 groups as being separate. The politicians, developers and banks are one homogenous entity. Let’s call them the PODS. Where the problem first arose for the PODS is when the investors realised that it was all a scam, in particular when it came to sub-prime loans. These were usually 100% loans given to first time buyers, who had no income, no job or both and it was suddenly realised that these people would never be able to pay off their debt. Everyone panicked as loans were called in and no one could pay.
The same applies to our developer friends. The loans were called in and they couldn’t pay therefore, the banks couldn’t pay back their creditors, who by the way are usually in Germany. Where else did you think all this free money was coming from? This is where the government stepped in to stop the banks from going under. They guaranteed the banks and effectively paid off their debts so that the banks wouldn’t go under and hence, as we are led to believe, stop the country from going under. This is where NAMA comes into the picture. NAMA, the National Assets Management Agency, was set up in order buy all the land off the developers and banks that they had bought during the so called boom. Most of this land is now worth less than half of what it was 2 years ago. So, you would think that when buying up this land the government would be paying a rock bottom price for it. You’d be wrong in thinking that.
Instead, the government decided to pay current prices for the land. So, at the time it paid €54 billion for land worth €77 billion. A deal you would think! Wrong again. The land is now worth €47 billion. That 21% of a difference has to be made up by the tax payer. The government has already paid well over the odds for the land and property prices are far from reaching the bottom. During the 90’s, when Japan had its own boom to bust scenario, land prices fell by 70%. We are a long way from the bottom but the PODS would have us think otherwise. NAMA is an utter deception which is completely reliant on the premise that there will be another property boom, which if you are in any way sensible, you do not want to happen as it cannot be sustained. Economic history from all over the world tells us this. But this does not matter to the PODS. The bottom line for them is money and it is something that they can never have enough of. Money is power and with power, comes money. It’s a self reinforcing cyclical system. Just to make a further point that the PODS do not care about the average person, that they are without shame or any guilt is the fact that they are effectively investigating themselves. We have all heard that the issue of the banks’ irregular loaning policies is being thoroughly investigated but this is merely a façade in order to placate the masses.
Firstly the people investigating why the banks went bust in the first place are the very people who helped to facilitate it. The Arthur Cox law firm that has been appointed as legal advisor to NAMA, was involved in a deal involving DEPFA Bank. This bank very nearly brought down the German banking industry due to its complete disregard for basic banking procedures. It’s worth noting that the bank moved its headquarters to Dublin in 2002 due to somewhat more relaxed regulatory procedures and lower taxes over here. The assets this bank was selling were triple A rated by rating agencies, whom by the way are very much involved in the cartel that makes up the PODS. Secondly, just to prove that NAMA is nothing more than an exercise in friends helping friends, the day that the formation of NAMA was announced, the shares of Bank of Ireland rose by 10%. The next day they rose by a further 9%. Need I say more? Thirdly, there is the issue of the transfer of funds between Anglo-Irish and Irish Life and Permanent in late 2008. Anglo lent Irish Life €7.45 billion for one day which was then re-deposited into Anglo Irish the next day, by a subsidiary of Irish Life, and was recorded as a customer deposit in order to shore up the accounts of Anglo Irish in order to make it look like it was more viable than it actually was. Despite this obviously being highly illegal, the government knew about it and did nothing. It has now only come to light that the government knew, as the former Chief Executive of Irish Life has sworn on an affidavit, that the Department of Finance, the Financial Regulator and the Central Bank all knew of the transaction but did nothing.
The above are just three examples of the cosiness within the PODS in this country and there is nothing remotely extraordinary about it. In fact, the above is not even the tip of the iceberg. The PODS are so reliant on each other that we effectively have banks and developers running the country. Think of that as scaremongering if you will, but when you have banks investigating banks, you know there is a problem inherent in the system. This brings me to the main crux of my argument. Ireland is right now very much at a turning point, or if you prefer my earlier analogy, hanging on to the edge of a precipice. By continuing to prop up the banks and the developers, the government is merely extending the length of the recession. As most of our European friends are coming out of the recession we will be, and still are, floundering in the doldrums. The Irish government has no plan to reinvigorate our economy. Its only plan is to throw more and more money, which is only a short term loan, at the banks in order to ensure that the PODS remain upright and intact. The success of NAMA is completely reliant on the price of land returning to pre-2008 levels. As economic history will tell you, this is highly unlikely and even more so, it is something that we should not be aiming for. But the PODS are because, like I said earlier, money is power and with power, comes money.
What we really need instead of the PODS is a new and fresh beginning from which to get the country well and truly on its feet again. The only economies that have successfully weathered a recession and come out stronger at the other side are the ones that tore up the rule book and started all over again. What we need is the 21st century equivalent of the Whitaker Report. While every western country was flourishing in the post-war boom in the 50’s, Ireland was deep in recession. This was due to protectionism and general short-sightedness on the part of the De Valera led governments. It was the 50’s version of the PODS that we have today. However, then T.K Whitaker came along with his First Programme for Economic Expansion which helped to save the country. It argued that protectionism and cronyism was killing the country. Instead he favoured long term investment in the future of the country, a greater reliance on exports and the end of protectionism. “Export or die” was one of the mantras of his report.
We need a plan of this magnitude in order to save the country. Instead, the government is literally throwing money away in the direction of their PODS friends. We have government ministers saying that there is nothing inherently wrong with letting the young people today emigrate, something which we all thought was a long gone forgotten memory of the 50’s and 80’s. Instead we have the PODS who are actively and willingly destroying the country and the future of the country in order to help themselves. As I sit here writing this, I know that there is no future for me in this country. Maybe there never was and the boom was really just an illusion that some of us were fortunate enough to never get caught up in.