Tuesday, 11 March 2014

DAN O'BRIEN'S FLAWED ANALYSIS

In last Sunday’s Independent there were two articles, one by Gene Kerrigan titled ‘Achtung Bono! Try studying works of Professor Frankfurt’, the other by Dan O’Brien titled ‘Demonstrators' analysis of the bank bailout is deeply flawed’. 

The first, which spoke to us about a book by Professor Frankfurt called ‘On Bullshit’, could have been written about the second.

Dan’s article was on his interpretation of our campaign here in Ballyhea and Charleville and to be honest, two days and several examinations of that piece later I'm still scratching my head. 

That Dan never bothered himself with actually researching our position on what has happened and how we believe it should be rectified (the link is here Dan if you'd like to do so now, late as it is) is bad enough. But his logic, well, simply defies logic. First though, his inaccuracies.

The Ballyhea protesters argue that the underlying cause of the crash was a badly designed euro and a central bank in Frankfurt that did not do its job.’ This was his first error but Dan was only warming up. ‘They believe that when the consequences of these failures manifested in a banking collapse, the powers that be in the EuroZone forced weak Irish governments to socialise the costs. On the basis of this analysis, they argue that justice demands other European countries repay the Irish state the approximately €65bn spent on the bank bailout. But agreeing with that analysis, however popular it might be, would be dishonest because the protesters' analysis it is almost completely flawed from start to finish.’

Oh Dan. Even we don’t agree with that analysis; it’s your analysis of our analysis that’s completely flawed, not at the start but certainly to the finish.

Yes, we believe the badly-designed euro was the underlying cause of our crisis. And that’s it, that was the sole underlying cause – the ECB and its role came later. The euro wasn’t just badly-designed however, it was structurally flawed, its own failure in-built, a premise Dan seems to accept. In fact he goes further than we have ever gone, predicts it could even end up destroying the EU.

‘The starting point is the euro and its design’, he says; ‘At this juncture, it is hard to avoid the conclusion that the creation of the single currency was a mistake. It has proved to be the perfect transmission mechanism for financial crisis and caused profoundly deep divisions among the states and peoples of Europe. It may yet prove that a project designed primarily to bring Europeans together ends up doing precisely the opposite.’

Ok, we’re with Dan to this point. On the ECB, however, we have never said that it was ‘the underlying cause of the crash’ – the ECB was designed with the euro, only came into existence six months before the euro was launched.

However, as the outflow of hundreds of billions from the core European countries (France and Germany especially) to the periphery was happening, in Ireland especially the ECB failed utterly in its primary role of ‘maintaining price stability’, as house prices shot up. Bad as was that failure, what they subsequently did to Ireland was worse – they abused their power, blackmailed Ireland into accepting the losses of the various institutional investors/gamblers.

No evidence of this, says Dan; let him take that up with Michael Noonan, with Leo Varadkar, with these guys: In his book 'The Price of Power' Pat Leahy states: ‘a series of increasingly fraught phone calls on March 31, 2011  between the ECB boss and Finance Minister Michael Noonan in which Jean-Claude Trichet spelled out the consequences of burning the bondholders; "No, no, no," said Trichet. If you do it the bomb will go off. It will not go off in Frankfurt, it will go off in Dublin". The 'bomb' would be the sudden withdrawal of all the ECB funding that was keeping the Irish banks going. "Rattled by such high-powered pressure, Noonan backed off at the last minute’.

On 28th January 2014 Citigroup economist Willem Buiter was reported in the Irish Times to have stated; ‘strong pressure from Germany, the US and then ECB president Jean-Claude Trichet blocked that move. Mr Buiter said Ireland had been “cajoled, coerced, you might even say, extorted” into a deal that saw €30 billion to €60 billion of bondholder debt lumped on to the taxpayer.’

We object to that extortion, to the overall immorality, and again Dan would seem to be with us. ‘The socialising of massive private losses is a huge injustice’ he says, later in his piece.

It seems though that he agrees only to disagree. Ascribing to us again and again positions we’ve never held, he then points out to us – again and again – the error of our ways.

‘It is wrong to blame it (ECB)  for failing to regulate the EuroZone financial system before the crash. That is because the countries which signed up to the euro and designed its institutions wanted to keep regulatory powers in national capitals rather than transferring them to Frankfurt. It is not credible to blame an institution for not exercising powers it never had in the first place.’

Wrong again Dan, gross misreprentation of our position. Contrary to blaming the ECB for not regulating, we have accepted over and over the failure of our own Regulator, of our own banks and bankers, of our own politicians, in office and out. What you're referring to above however is one of the critical design failures of the euro, the results of which were both foreseen and foretold by many, in this article by Belgian economist Paul de Grauwe.  And yet, knowing the potential for disaster, the EU went ahead and launched. If an engineer designed a building, offered it to a client who removed several critical structural columns and beams, then went ahead anyway with the construction – when that building collapses, who takes the rap? That design engineer will end up in jail but in our case, even as the building comes crashing down around us not alone do we not get our money refunded, we have to compensate the owners.

‘The Ballyhea protesters say that foreigners forced Irish governments to ensure that Irish taxpayers repaid all investors in the domestic banks’, says Dan.

First, we don’t speak in terms of ‘foreigners’, which makes us appear as myopic nationalists – we’re not; second, we don’t speak of ‘Irish taxpayers’, we speak of the people, most of whom bear the brunt of this burden; finally, we have never said/inferred/suggested that any external institution forced all this debt on us. On the contrary, we have repeatedly pointed to the blanket bank guarantee of 2008 as our own doing, Irish people in Irish banks misleading Irish politicians who were being advised by individuals of proven ineptness. That wasn’t the source of our problem, however; at that stage it was already too late, damage already done. We go back to the launch of the euro, the known in-built flaws and we ask – where was the planning for the inevitable disaster? Why was there no system in place, why was it left to Ireland to try to defend itself in this situation?

‘Their analysis is flawed,’ concludes the bould Dan, ‘and the prospect of other taxpayers in Europe (many of whom have paid for bailing out their own banks) gifting Ireland €65bn is next to zero.’

We have never asked for a ‘gift’ from anyone, we demand only that this odious burden be lifted from us. We have never said we have no blame in this, in fact again it’s the contrary – we have always said that as part of the EU, as part especially of the Eurozone, we carry our share of the blame for this debacle. We should carry only our own share of the cost. So though should those whose greed and corruption also led to all this, which is why we are fully behind the Financial Transcation Tax currently supported by 11 European countries, including Germany and France but not Ireland.

I could go on. His utter misrepresentation of our campaign apart, there are other areas of this piece where Dan first seems to establish one argument, then totally undermine it with another. ‘Far too much money flowed into Ireland in the 2002-07 period, and this cash was central to the inflating of a massive property bubble’, he proclaims (correctly); a few paragraphs later, as though absolving those who poured those billions into Ireland of any blame, he says  If the sudden availability of cheap money was the cause of the Irish bubble, why did Italy and Portugal not also overheat when their interest rates fell by as much or more than Irish rates?’ I give up Dan – are you saying Ireland would have had that massive property bubble anyway, euro or no euro? 

Then he says – ‘Another variant of the argument that attributes the Irish bubble to the euro relates to interest rates. They did decline a lot in the run-up to the launch of the single currency in 1999 and interest rates do, of course, influence economic activity. But they do not determine everything.’ Dan, if you ever discover what determines ‘everything’, man, you're in business! In the meantime though, I hope you're not trying to tell us that the universally low interest rates in the Eurozone weren't a major factor in the crisis?

That was Dan O’Brien and his article. In fact there is one paragraph in it that for the life of me I can't sense of high up or low down – perhaps someone can enlighten me: ‘Until the megabubble exploded in 2008, financiers ramped up the channelling of huge amounts of money to the most unlikely places with little or no consideration for the risks involved. The countries into which the international financial system poured most money (measured by balance of payments deficits expressed as a percentage of GDP) were non-euro countries. Iceland, Latvia, Estonia, Bulgaria, Romania, Moldova, Albania and Georgia all recorded bigger balance-of-payments deficits than any of the euro-area countries.’ And? Relevant to our situation, the point of that paragraph is what, exactly?

Going back to the top, a couple of paragraphs taken from Gene Kerrigan’s article: ‘The bullshitter, Professor Frankfurt says, "does not care whether the things he says describe reality correctly. He just picks them out, or makes them up, to suit his purpose . . . He does not reject the authority of the truth, as the liar does, and oppose himself to it. He pays no attention to it at all. By virtue of this, bullshit is a greater enemy of the truth than lies are."
In short, it's about saying whatever works. The bullshitter merely has to create a plausible story, unhindered by any obligation to reality. It merely has to look like it might be true. And, when the alternative is a more complex, more difficult narrative, the bullshitter wins hands down. Faced with two apparently plausible stories, people will always – always – choose the simpler, less demanding and more hopeful one.’

A few months ago we in the Says No campaign had our first up-close-and-personal experience of the Dáil. Through the Technical Group, backed by a few other independents and by Sinn Fein, we managed to get a Motion introduced via a Private Member’s Bill, a single paragraph that the government ask (simply ask) the ECB for permission to destroy the €25bn in Promissory Notes sovereign bonds now awaiting sale by the Central Bank. The €25bn thus raised will be destroyed, every cent, but we will be paying back both the principal and interest – an estimated €72bn in all – over the next 40 years, the bulk of those payments falling on future generations.

The government didn’t just vote against; a succession of back-benchers gleefully derided those of us who had brought forward the Motion and between them spoke for hours and hours. All of that time was spent on hyperbole; not a second of their speeches was spent on addressing the actual motion itself.

Just over a week ago I declared my candidacy in the Ireland South constituency for the upcoming European Parliament election. For the last three years Dan O’Brien has ignored us. Is this what we can now expect from him in the coming couple of months?

Regards,
Diarmuid O'Flynn.

1 comment:

  1. A brilliant rebuttal. Inspired, inspiring and chuckle inducing.

    ReplyDelete