We're in pretty big trouble here. There's so much crap flying around it's difficult to isolate the issues. Broadly speaking there are two main problems, a spin off problem based on the first two, and a solution that resolves one but not both.
Problem #1. The Bank Crisis.
So our banks are the same as everybody else's. While we were not effected by the sub-prime problems in the States nor the kind of corporate greed of credit default swaps, we just had greedy bankers giving away truckloads of borrowed cash to an increasingly heated property market.
You can't blame the government for this with one exception, regulation. Who regulates the regulator? When you consider that outside agencies such as The New York Times were pointing the finger at Ireland's lack of fiscal governance, you'd think someone up high would take an interest in it.
The most damning thing is potentially still out there. From what I can see it appears our ex-financial regulator, civil servants within the Central Bank, and certain Irish banks like IL&P and Anglo-Irish actively colluded together to lie to the Stock exchange, outside investors, and the Irish people.
So either someone in the government was aware of this and should be sacked, or else nobody was aware of it and so were therefore merely stupid and incompetent. As you may be aware, being stupid and incompetent is not a sackable offence in this country, just look at our current Tanaiste, Mary Coughlan.
Problem #2 The balance of payments.
Look guys, what goes up must come down. I don't think any country in the world that has gone through a property boom where prices doubled or tripled hasn't gotten away with the fabled 'soft landing'. The prices will always crash.
For the last 12 years we have had a government with Plan A. Make revenue from property sales. Plan B was when people sold their house and made lots of money they would buy nice new shiny 4X4's and give themselves lots of nice things they really didn't need. So the government had the VAT and VRT revenues lining their pockets.
Plan C was to give most of this money away in tax cuts (so they would get elected) and tax breaks for the wealthy, or at least those of us who could afford accountants.
Plan D was to create lots of jobs in the public sector and pay them whatever they wanted and under any terms and conditions, without any benchmarking on trivial things like skill, ability and value for money.
Because there's no tomorrow is there?
So now we have a situation where the government have to borrow €55m every day just to keep the show going because they, and they alone, have wasted the opportunity to make us into a fiscally responsible country like say Germany.
I've yet to hear anyone from the government apologise for ruining our economy. When you consider that our current Taoiseach was the minister for finance for 4 of the more recent years, the buck has to stop there.
It's said that you get the government you deserve. Are the Irish that bad a people?
Problem #3 The spin off
There are two organisations that give countries and financial institutions credit ratings by their clinical and expert perspectives. One is Moody's and the other is Standard & Poors. As it stands at the moment, they consider us to be the riskiest country in the EU zone to give credit to.
That means we're riskier to lend money to than Spain, Italy, Portugal and Greece. No offence to Greeks but your country is a basket case, and apparently we're worse. Being riskier means it costs more money to borrow and the cost of insuring that money is higher too.
Why is this? Well it's a combination of problems #1 & #2. But critically, it's also a commentary on how the government are handling the crisis and how much confidence they have in our banking and regulation system.
Yes, we're that bad. Don't take my word for it, take the word of the market. And as we've seen over the last few months, time and time again the government have been wrong, and the market has been right.
The solution. But only for one
We had a finance minister who some time ago thought it would be a good idea to save a bit of money for a rainy day. His name was Charlie McCreevy. He was exiled from Minister for Finance to EU Commissioner some time ago to be replaced by the wonderfully short sighted Brian Cowan.
Charlie, and I'm not a fan as he's as much to blame as Mr Cowan, decided to put away and invest 1% of GDP every year. This fund was worth (even after a woeful year in investments) about €20 billion at the end of 2008. This, and only this, is keeping our heads above water.
In itself it would be enough to resolve our banking crisis. In itself it would be enough to reduce the chronic tax burden and enormous cuts we are going to experience over the next 4-5 years.
But it can't do both.
It just shows what could and should have been done over the last 12 years.
There's no point saying that we're learning from our mistakes, these kind of errors only happen once a century.
So that's it, we're screwed.
Thanks Fianna Fail.
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