For several years, commentators, economists and the OECD had been saying that Ireland was eroding its competitiveness with an asset price bubble focussed on property, mainly residential. Those in authority and those temporarily profiting (strongly overlapping cadres) sneered at the warnings and the warners. Famously, the Taoiseach-du-jour suggested that they should ‘commit suicide’.
The bubble burst, everyone woke up, the party was over and the ship of state started to sink. The ‘Establishment’ panicked, threw out the old rulebook (including hundreds of years of commercial law and economic theory) and dreamt up a scheme to keep them and their pals on the top of the heap for a few years longer. The centerpiece of this fantasia was ‘Long Term Economic Value’.
It was immediately apparent to the critics of the previous set of ruinous policies that this was an Irish version of ‘Extend & Pretend’ or, in simpler terms, “betting the farm” and “throwing good money after bad”. This constitutes breaking the only two rules of sound banking.
The critics pointed out that the answer to “too much debt” cannot be “more debt” and that the vehicle (NAMA) was prone to exacerbating all of the problems of the previous policies (relying on over-investment in property, for the benefit of a Golden Circle, through opaque processes, at taxpayer & consumer expense). Further, it was pointed out that there was no linkage that ensured that the funds provided would generate the lending or liquidity needed in the domestic non-exporting economy.
The Golden Circle forced through their ‘policy’ and then had the cheek to say in public, less than a week afterwards, in a parliamentary hearing, that the policy would not generate new lending and that the critics were correct. It has since emerged that the IMF told them so at the time they were drafting it. The ‘Circle’ were citing IMF approval of the scheme while, at the same time, misrepresenting what the IMF were saying to them.
Eighteen months, three budgets and massive borrowings and unemployment later, the nation is circling the plughole at a faster rate, the ‘Circle’ are still in office, in their jobs and in possession of their hugely bankrupt properties. The NAMA vehicle has been gutted by the EU Commission so that the taxpayers cannot be excessively ripped off by their rulers. For this alone, I and a whole generation of Irishpersons will be eternally grateful to the EU.
But this means that 18 months have been wasted building a rescue vehicle for the ‘Golden Circle’ that cannot help them, was never going to help the mortgage holder and will, by its absorption of capital, restrict the State from other remedial policies.
Two sets of failed policies behind them and the ‘Circle’ are content to sit there intoning the mantra; “We are where we are.”
Not only have they done nothing positive, they have made the situation worse by wasting time, money and trust on their greedy schemes. Furthermore, they are now back in the same mental space where they were in 2006/2007 where they are too preoccupied with internal squabbles and machinations to realise that the situation is worsening by the day.
And the people let them….