The Ireland EU bailout is getting panned from many sides. This article by Mish shows that he agrees with one of his favorite adversaries on this particular issue. The question is how the ordinary people of Ireland benefit from bailouts of the banking system. Things are a little more clear over there than they are over here. Ireland is a small country, most of its creditors are foreign banks, and severe austerity is being imposed by outsiders. Why?
While these considerations are not openly discussed in most media stories, the reason all parties want to bail out the banks is the same this time around as it was last time. The perceived risk is contagion and systemic meltdown of the financial system. The flame of that perception is stoked by the commercial banking industry itself, captured government officials, and central bankers.
Writer Mike Whitney has stern words concerning this bailout.
This is a black day for Ireland. The Irish people will now face a decade or more of grinding poverty and depression thanks to their venal leaders. As soon as the ink dries on the IMF loans, the second occupation of Ireland will begin, only this time there won’t be armored cars and Paramilitaries in fatigues, but nerdy-looking bureaucrats trained in the art of spreading misery. In fact, the loans haven’t even been signed yet, and already IMF officials are urging the government to cut jobless benefits and the minimum wage. They’re literally champing at the bit. They just can’t wait to get their hands on the budget and start slashing away.
And don’t believe the hype about European unity or saving Ireland. My ass. This is about bailing out the banks. The bondholders get a free ride while workers get kicked to the curb. Here’s a clip from the Financial Times that spells it out in black and white:
“According to data compiled by the Bank of International Settlements, the three largest creditors to the Irish economy at the end of June…were Germany to the tune of €109bn, the UK at €100bn and France at €40bn. These sums amount to 2 per cent of France’s gross domestic product, 4.5 per cent of Germany’s GDP, and 7 per cent of British GDP.”
Ireland is being asked to cut to social services, slash wages, renegotiate contracts, and dismantle the welfare state so that undercapitalized banks in France and Germany can get their pound of flesh. But, why? They’re the ones who bought the bonds. No one put a gun to their head. They knew they could lose money if Irish banks went south. That’s the risk they took. “You pays your money, and you takes your chances.” Right? That’s how capitalism works.
Not any more, it doesn’t. Not while Cowen’s in charge, at least. The Irish PM has decided to bail them out; make all the bondholders “whole again.” But who made Cowen God? Who gave Cowen the right to hand over his country to the IMF?
No one. Cowen is a rogue agent kowtowing to international capital. After he finishes his work in Ireland, he’ll probably join globalist Tony Blair on the French Riviera for a little hobnobbing with the tuxedo crowd.
The Irish people didn’t struggle through centuries of famine and foreign occupation so they could be debt-peons in the EU’s corporate Uberstate. Like Sinn Fein president Gerry Adams said, “We don’t need anyone coming in to run the place for us. We can run it ourselves.” Right. Tell the EU plutocrats to take their Utopian Bankstate and shove it.
I also fail to see how holding bank bondholders harmless while severe austerity is imposed on a general population is not disproportionate central decision-making to benefit the few at the expense of the many. Risks were taken for profit. The losses should not be socialized. Granted, if the banks were suddenly insolvent, the ramifications for the economies would be severe. However, if as Bill Black has suggested in his recent writings, resolution authorities stood ready to continue business operations and a true free enterprise system had fresh private capital ready to step into the breach, the dislocations could be manageable. But we do not have a true free enterprise system here in America or in the West in general. We have oligarchy, plutocracy, corporatism, etc. It is vested interests that stand in the way of creative destruction. To prepare any economy for financial transition where old institutions die a natural death and new ones arise from the ashes requires a democratization of both politics and business. I see few leaders prepared to lead that democratization. In fact, here in the U.S. the protectors of the banks are still ascendant. This protection actually prevents the development of a cure. For surely the cure is not more of the same.
So today it is austerity for Ireland, Greece, Latvia, soon Spain and Portugal. When will it be America’s turn?