Oct 2008

Ireland to embark on €400 billion cocaine binge?

As you no doubt already know, dear reader, I’m not exactly a champion of free-market capitalism. My opposition is rooted in philosophical — and increasingly, psychodynamic — objections rather than traditional economic ones and my grasp of the more arcane aspects of economic theory is not very strong. Better than Sarah Palin‘s I’d wager, but not very strong all the same.

So I don’t claim to understand precisely how this credit crisis developed, nor how the various bail-out packages around the world hope to solve it (this is as good an explanation for the non-expert as I’ve found though).

I’m fairly certain, however, that the root cause of the whole thing can be traced to a willingness in people (both large institutions and a whole bunch of mortgage applicants… though mostly large institutions) to take out loans they couldn’t afford to cover. In other words, to sign contracts that obliged them to pay back money they simply did not have.

My question to you, should you happen to understand all of this, is how exactly is the decision by the Irish government to guarantee 6 banks to the tune of €400 billion any different? This represents 37 years worth of Irish tax receipts. It’s twice the GDP of the entire nation. Put simply, Ireland does not have this money.

I realise that the point of the guarantee is to shore up confidence in the banks and thus avoid having to bail them out in the first place; that the government is making this promise in the belief that they’ll never actually have to honour it. But the people who allowed this crisis to develop in the first place, and whose judgment should therefore be considered extremely suspect, are the very same ones now drawing up this plan.

So based on their track-record, there’s no reason to believe that this €400 billion guarantee won’t be called upon. And it won’t necessarily be because of a bank collapse. All it’ll take is just one greedy son of a bitch in one of these banks to find a way to make money off this guarantee (which will be law within a matter of hours); to find some legal loophole that allows them to syphon public money into their own pocket. Then, with a few coke-fuelled phonecalls every single banker in Ireland will be following suit.

This plan could bankrupt the country for generations to come. And yet it’s been hurriedly implemented by a government that frankly doesn’t have a clue what it’s doing, at the behest of the greedy fools who created the problem in the first place.

Posted in: Opinion