SHORT HISTORY OF THE PROMISSORY NOTES

2009/2010: Two non-systemic Irish banks are insolvent, need €31bn to bail out their creditors, most of whom are from overseas. The ECB, fearing contagion across the eurozone if they're allowed collapse, by-passes its own regulations on funding insolvent banks by accepting as collateral Promissory Notes signed by then Irish Finance Minister Brian Lenihan. The money is created.

Legally questionable (at best, which is what the Joan Collins TD Supreme Court case is about), morally reprehensible, it served its purpose, prevented the possible collapse of those massive banks in Europe, possibly saved the euro itself.

2011: The EU/EC/ECB, insisting the books must be balanced, calls in the Promissory Notes. The money was created, those banks didn't have the assets, Ireland must now take that €31bn back out of circulation. We don't have that kind of money (obviously!) so we borrow it and that March, in almost its first official act, the new Fine Gael/Labour government destroyed the first tranche, €3.1bn.

Despite propaganda to the contrary ('Oh, the bank-debt is a dead issue!'), that process is still ongoing. The way it works is this:

Our National Treasury Management Agency (NTMA) issues sovereign bonds from which it raises money for the national purse. Over the last few years, with interest rates so low, it's been building up a war-chest amounting to several billion. We're paying interest on those bonds and on their due date (when they reach 'maturity') we pay back the entire principal.

In 2014, the NTMA used €1bn of that money to 'cancel' two €500m Promissory Note bonds held by the Central Bank - in plain language, that billion was destroyed, to go with the €3bn in 2011.

In 2015, the NTMA used €2bn of that borrowed money to 'cancel' a further four €500m Promissory Note bonds - again, that money was destroyed.

The Central Bank is still holding approximately €25bn in Promissory Note bonds, awaiting the same fate. This is what Joan Collins is trying to stop, continuing an action started by David Hall. This is what the Ballyhea Says No campaign has been about. It's a must-win war.

PROMISSORY NOTE BONDS – A EUROPEAN FAIRY-TALE

Once upon a time there was a shiny new currency launched in Europe, the euro. Unfortunately however it was a flawed currency, structurally incomplete, no central control, the seeds of  its own destruction inbuilt.

Initially all seemed fine and money flooded from the wealthier nations to the poorer. Over time, as the increasing profits returned to those wealthy countries the flood became a tidal wave and the economies of several ‘borrower’ countries were swamped.

Increasingly it began to look as though all of Europe itself would be engulfed and in 2010 a plan was hatched; backed by Promissory Notes from its government, little Ireland – in the front line – would print an extra €31bn to give to two of its most toxic banks, Anglo Irish and Irish Nationwide, who in turn would pass it on to its big-bank European creditors, thus staving off a much bigger crisis – probably the failure of the euro itself – were those two banks to fall.

The plan worked, the European banks were saved, and after more remedial measures taken in the following years, the new currency still survives.

HURRAH, SAVED!

What was Ireland’s reward for taking this stand? 

Now safe and secure in their castle in Brussels and notwithstanding their own gross negligence in the oversight of the new currency and the damage it was causing, the King of Europe and his Council decided that Ireland needed punishment for its lack of control over its own banks. So they insisted that Ireland now had to take that extra €31bn its Central Bank had printed back out of circulation.

Not alone did Ireland not have this money, it had a growing national debt so – naturally – there was outrage. Few were more eloquent in their condemnation of what the King of Europe and his bank in Frankfurt were asking than Michael Noonan, one of the leaders of the main opposition party in the national parliament and in February 2011 the Irish people revolted, threw out the existing government and replaced them with these new heroes, who promised to take Ireland’s fight to Europe.

After the very first engagement however this new Irish leadership lost its courage and in almost its first act of government, borrowed the €3bn first instalment of the €31bn Promissory Notes debt and promptly destroyed the money – that was March 31^st 2011.

Since then they have compounded that act of cowardice with an act of betrayal, rearranging the Promissory Notes repayment structure such that the burden is lifted from themselves in the remaining years of their government, and transferred to future generations – 40 years of debt slavery for the remaining €28bn, the Promissory Notes now transposed to sovereign bonds that will ultimately cost us more than €70bn.

And we all lived happily ever after.

MAYBE NOT…

Okay, I made up the last line. Everything else is true.

This year our Central Bank is scheduled to sell the first of the Promissory Note bonds, €500m. What happens those five hundred million euro? Destroyed, taken out of circulation. Next year, another €500m – borrowed, destroyed. The same in 2016, 2017 and 2018. 

Then it gets worse.

Every year for the following five years, 2019/20/21/22/23, that figure doubles - €1,000m/yr, borrowed and destroyed.

Then it gets worse again. Eight further years, 2024-31 (inclusive), the Central Bank will take in €2,000m/yr, and destroy every penny.

In 2032 the borrowing and destruction ends, a €1,500m bond sold; that’s €25bn in all, to go with the €3bn bond from 2012 also currently held and awaiting sale by the Central Bank – a total of €28bn.

Immediately those bonds are sold we start paying interest on them, just under 3%/annum. Then, starting in 2038, whoever is in the Central Bank starts paying back the principal sums of those bonds until in 2053, the final payment - €5bn.

Debt-slaves to Europe, that’s our reward for bailing out those European big-bank creditors of two zombie banks, our reward for bailing out the euro.

TOO LATE? DON’T BELIEVE THEM!

We can stop it of course, if we have the will and the courage. Just as we are now showing our teeth on the water tax – one of far too many taxes and cuts imposed on us in the last five years, largely the result of the launch of this ill-designed currency – we can force a reversal of that Promissory Note ‘deal’ by Michael Noonan and demand the final destruction of those bonds now held by the Central Bank.

In Ballyhea and Charleville we’ve been campaigning against this injustice for over three years, joined since then by the likes of Ratoath and Dublin, a few small pebbles in the King’s shoe. Well, jack-boot, more like, boots that have been kicking us while we were down. Time we stood up, time we hit back.

WATER WASTAGE - MILLIONS DOWN THE DRAIN

In much of the promotion of Irish Water we’re told the major aim is conservation. This is obvious nonsense, easily disproved.

The current annual cost of water production is €1.2bn, the current annual national wastage is 42%; this means that of the current annual spend, over €500m worth of water is simply leaking into the ground, never reaches its potential end user - €50m more than what Irish Water would raise in 2015 if everyone pays this new stealth-tax (doubtful, at this stage).

Surely, surely, surely, it makes sense on so many levels to replace the current infrastructure before anything else is done? Apart from the jobs this would create, apart from the fact we would then have a 21^st century water distribution infrastructure fit for purpose for many decades to come, think of all the money saved, think how much less water would need to be treated, think of how it would see an end to many of the shortages we currently periodically suffer.

Where would the money come from to replace that infrastructure? Don’t get me started. It was only a few weeks ago that Central Bank Governor Patrick Honahan himself confirmed for us in the Ballyhea Says No bank-debt campaign that the first of the €28bn Promissory Notes bonds he currently holds will be sold before the end of this year, a ‘mere’ €500m bond, and that every cent of those hundreds of millions will then be destroyed or – in Patrick’s quaint bank-speak – ‘extinguished’. Oh it’s not ‘real’ money, he patronisingly explained to us – oh yeah? It will be real debt, real interest we’ll be paying for the next 40 years, and a very real €28bn that the next generation of Irish earners will be repaying when those bonds then start to ‘mature’, starting in 2038. That, my friends, is the Anglo/Noonan legacy to our kids.

Those who are currently campaigning against those water charges are absolutely right, deserve the support of every straight-thinking person in the country.

Regards,

Diarmuid O'Flynn.

THE ECB AND THE POUND OF FLESH

Shakespeare’s Merchant of Venice tells the tale of a merciless vindictive money-lender, Shylock, calling in a bond against the Merchant of the title, the non-payment penalty for which was

A pound of flesh, to be by him cut off

Nearest the merchant's heart.

The deadline arrived, the bond wasn’t paid, the matter ended up in court where the moneylender demanded his forfeit – the pound of flesh -

My deeds upon my head! I crave the law,

The penalty and forfeit of my bond.

There followed one of the great Shakespearian sonnets, Mercy, which began

The quality of mercy is not strained.

It droppeth as the gentle rain from heaven

Upon the place beneath. It is twice blessed:

It blesseth him that gives and him that takes.

Shylock is heedless, heartless, bound on having his pound of flesh and with it, the life of the merchant. Just as he’s about to plunge in his knife, however, a young lawyer (actually a young heiress, Portia, in disguise, the lover of the merchant's best friend) intervenes:

Tarry a little; there is something else.

This bond doth give thee here no jot of blood;

The words expressly are 'a pound of flesh:'

Take then thy bond, take thou thy pound of flesh;

But, in the cutting it, if thou dost shed

One drop of Christian blood, thy lands and goods

Are, by the laws of Venice, confiscate

Unto the state of Venice.

Thus is the merchant spared.

Take the above tale, put the ECB in the Shylock position, Ireland as the Merchant of Venice, and the same situation applies - through the infamous Promissory Notes, the ECB is demanding its pound of flesh from Ireland.

PROMISSORY NOTE BONDS

It was Einstein who said 'Make everything as simple as possible, but not simpler.' The Promissory Note bonds are complex, maybe deliberately so, means most people will simply (pardon the pun!) not bother to even begin to understand them. But it's worth doing so, because they are breaking this country, making debt slaves not just of this generation but of those who will follow, for the next 40 years at least. So please, try to follow this as I try to follow Einstein's directive.

The origin

During 2010 two Irish zombie banks, Anglo Irish Bank and Irish Nationwide, needed €31bn to cover their liabilities, billions they didn’t have. At the time, and eventhough we were now three years into the crisis, there was still no EU structure in place to solve this crisis so the ECB and the EC allowed the Central Bank of Ireland print the €31bn and accepted as collateral the hastily drawn Promissory Notes from the Irish government. In doing so they bent and twisted their own rules and regulations but so be it, needs must and this was an emergency situation. They feared for many of the major creditor banks at the core of Europe if those two Irish banks were allowed go under, the contagion effect, feared even for the survival of the euro itself. So, the money was printed, given to the two banks who duly distributed it to their creditors world-wide – not a cent given to the Irish exchequer.

It worked, the crisis was eventually stabilised and of course we should all live happily ever after. But no.

Four years on, the EC and ECB are in Ireland looking for their pound of flesh – they want that €31bn taken back out of circulation, every cent of it. Already they’ve had €3bn, when the first of those Notes fell due in March 2011, €3bn borrowed and destroyed that year by this broken county. Now another €28bn sits in bonds in the Central Bank, awaiting sale per a schedule that the ECB wishes to see accelerated.

The P Note bonds schedule

Per that current schedule, the Central Bank of Ireland will this year (2014) sell a bond of €500,000,000, then take that money and destroy it. 

This is worth repeating - they take those hundreds of millions of euro raised from the sale of that bond, millions this country sorely needs (think of the water charges now being imposed) and they then destroy those millions.

Immediately, we - the broke Irish people - will start paying interest to that bondholder and in 24 years’ time, 2038, all the interest having been paid, that bondholder will come back to the Central Bank of Ireland looking for the entirety of those millions.

That’s just the beginning.

Next year, another €500,000,000 Promissory Notes bond will be sold, the millions likewise destroyed, then the same again for a further three years - five years at €500,000,000 per year, every cent destroyed.

Obscene, yes, when you consider that all this debt was to bail out the international creditors of two zombie failed banks.

But it gets worse. After 2018 the process accelarates - €1,000,000,000 a year for five years, then €2,000,000,000 a year for eight years; finally, in 2032, a bond of €1,500,000,000, making a total of €25,000,000,000. In words, twenty-five thousand million euro, every euro destroyed, confirmed for us by none other than Patrick Honahan, Governor of the Central Bank.

Also held by the Central Bank at the moment and already being sold (€350,000,000 sold and destroyed in 2013), a bond for €3,460,000,000 to cover the Promissory Note of 2013, which means the Central Bank actually holds over €28bn in bonds - that's €28,000,000,000.

Possible solutions

Those billions were printed for the benefit of the EU and specifically the EuroZone, including Ireland. That money is already in circulation, has had no impact on inflation or on anything else. It should be left there, the remaining Promissory Notes bonds held by the Central Bank of Ireland destroyed, the €3,060,000,000 already destroyed returned to the Irish treasury.

At worst the Central Bank should hold onto the bonds, not sell them into the market, let them die a natural death as they reach the 'maturity' rather than adding to the suffering and deprivation of the Irish people.

But the EC/ECB continues to demand its pound of flesh from us and doesn’t give a damn if in doing so, they drain the lifeblood from the Irish people. And the lifeblood IS being drained. Anything else that Europe and the world is being told is a mixture of lies/half-truths/exaggerations, spin by a dying and desperate government. 

Europe is told Austerity is working, Ireland is the perfect example. We can see how this impression is being created, the headline numbers being quoted to back up that assertion. But look behind those numbers.

UNEMPLOYMENT FALLING

The world is told that Ireland's unemployment numbers are finally falling, corner turned and green shoots, and hopefully this turns out to be a genuine recovery.

What the world is not told is that when all the various government schemes are taken into account, when all those who are on welfare but in part-time employment are taken into account, and especially when emigration is factored in, the number soars to over 25%.

61,000 NEW JOBS CREATED IN 2013

An utterly spurious claim, debunked by Finfacts and by Michael Taft of Unite. In fact the CSO's own press release refutes it, just over 30,000 more people in employment at the end of June 2014 than in June 2013. An improvement, certainly, but in what areas are those jobs being created? And by whom? Certainly not by the government, whose only job ‘creation’ was in the areas of spin – with their multiple highly-paid advisers – and the new quangos being created.

EMIGRATION

Never spoken of when the above headline figure is being quoted but were it NOT for emigration, where would Ireland be? People are leaving Ireland at levels not seen since the 1840s, the Great Hunger, when the population almost halved in only a few years. 

In a heart-breaking article titled Purging Ourselves Of Our Young, Michael Taft shows that in the three years up to 2013 nearly 250,000 Irish people under the age of 29 emigrated - a small GAA club in Mayo recently picked a notional starting 15, all of whom are gone.  It’s not just young people leaving either, it’s entire families, it’s people in their 50s and even in their 60s, forced out by the circumstances created by these austerity programmes.

SUICIDE

Yet another statistic overlooked when Europe, having been so misinformed by our own officials, talk up how Ireland is doing under the austerity programme. There are so many casualties at the moment but these are the ultimate, a growing number of people who feel trapped, can’t see any other way out and thus act, not because they wish for death but because they can't handle life, not the kind of life now being imposed on them.

RETAIL SALES

You want to know how a country is doing, look at the retail sales, look to commercial vehicle sales and see how much confidence business has in the immediate future; in Ireland’s case, little or none. They’re the ones doing the highest and the heaviest mileage, they’re the ones who need to keep their fleets up to date; they’re the ones now hedging their bets.

DIY STORES IN TROUBLE

Look at the number of DIY chains gone into receivership – Homecare, Atlantic Homecare and B&Q; not alone has the construction industry folded, people can’t even afford to maintain what they have.

EXPORT-LED RECOVERY

Another myth. Aside from the fact that as pointed out by the EU itself, many of those exports aren’t actually fully produced here at all, there is a growing trend away from Goods exports to Services exports, the latter far less beneficial to the Irish economy – high-end jobs, many of them filled from outside the country anyway but certainly having very little impact on the local unemployment figures.

DEBT SUSTAINABILITY

The normal formula used when calculating national debt sustainability is GGD/GDP, Gross Government Debt as a percentage of Gross Domestic Product. Our GDP and GNP figures are distorted by the multinationals, massaged by the government to appear better than they are but be that as it may, the more pertinent debt calculation formula for Ireland is GGD/GNP, Gross Government Debt as a percentage of Gross National Product. 

Using the GDP formula Ireland’s graph has been rising soaring into the red zone for years, to the point that at the end of 2013 the ratio was at 123.7%. But what would it be if the more accurate GNP figure were used? 

Our GGD at the end of 2013 was €203bn, GDP in 2013 was €164bn, GNP was €135bn; this would give a debt/GNP ratio of 203/135 x 100 = 150%. 

Sustainable? Given that we’re in recession, unlikely to see any real growth for years, that debt figure increasing in bounds? Economist Michael Taft puts it very succinctly – a bloody disaster. Constantin Gurdgiev, an economist from the another side of the field, puts it as colourfully – the light at the end of the tunnel is an oncoming train.

Add in the SME DEBT (€9bn now in default), HOUSEHOLD DEBT (€166bn at end of 2013, 123% of GNP), MORTGAGES IN TROUBLE (we’re world champions apparently), STEALTH TAXES (a raft of these - Universal Social Charge rise, Carbon Tax increase, Water charges, Property Tax, Pension levy hikes, Prescription charges rise, Public transport hikes, Maternity Benefit changes, Excise Duties, etc etc), and STEALTH CUTS, and where are we?

It is claimed that the budgets of the last few years have been progressive, hitting the strongest hardest – untrue, that claim has been dismantled, again by Michael Taft, one of those trying to negate the lies. Even within Ireland itself, a compliant media are contributing to the illusion that austerity is working, that compliance exposed in a comprehensive study by Dr Julien Mercille of UCD. 

The world is repeatedly told that Ireland was bailed out in November 2011, that Germany in particular saved the EuroZone. The opposite is the truth – Ireland has helped to bail out Germany and in particular, the German banks, and no country in Europe has profited from this crisis to the extent of Germany. Where did the Greek ‘bailout’ billions go, to the Greeks? You would assume so – you would be wrong. Much of it went to banks, to German Banks. So who is bailing out who?

Our government says the IFSC isn’t a tax haven – independent studies suggest otherwise, the IFSC facilitating tax avoidance on a grand scale. Those in the most senior positions in the IFSC have the ears of those in the most senior positions in government, outlined in an article in the Financial Times, while that same government is heedless of the cries of its own people.

I could go on, and on and on and on. But enough. No matter how it happens, we – the people of this little nation – will work our way out of this and in doing so, we don’t need anyone’s charity. We do however need to have this unjust burden lifted from our shoulders, we do need someone to step in and challenge the EC/ECB on their determination to have their pound of flesh. 

Regards,

Diarmuid O'Flynn.