Thursday, June 16, 2011

Iceland and Ireland

One of, if not the best political blogs in Ireland - recently posted on the Ireland vs Iceland situation.
A few months back, it was drummed into us by politicians that we did not want to be Iceland, that being Iceland was to be a financial leper.

Well, lets look at the results of people power in Iceland. We keep being told about being on the Bond markets - Iceland returned to international debt markets for the first time since its banking meltdown more than two years ago as investors offered to buy twice the amount the government offered in dollar-denominated bonds.

Iceland averted a sovereign default by refusing to let the Government bail out bondholders when its banks failed in October 2008.
Iceland will enjoy economic growth of 2.2 per cent this year and 2.9 per cent in 2012 as its budget deficit narrows to 1.4 per cent of GDP, according to the Organisation for Economic Co-operation and Development.

The island’s approach to resurrecting itself from financial ruin has won the praise of Nobel laureate Paul Krugman, who says Iceland is now better off than euro member Ireland.

On the other hand we elected FG and Labour who continue with failing FF policies, our services are being cut back, our hospitals sold, we are allowing development of frac drilling all at the behest of the EU/IMF.
At the end of May, the banks’ total borrowings from the Central Bank in Ireland and the ECB stood at €156 billion, down from €160 billion in April.

The gradual loss of deposits at the Irish banks over the past year has led to a surge in borrowing from the ECB which reached a peak last November, when banks here were in receipt of €136.4 billion in funding.
The dramatic rise in Irish financial institutions’ dependence on ECB funding, at a time when other countries were reducing their reliance, is believed to have been one of the key triggers behind the IMF-EU bailout.

What galls me most is yesterday, listening to Brendan Howlin, a Labour politician, talking about burden sharing in the country.
Lets get this straight - the vast majority of people in this country were not involved in the banking sector or property speculation - Why do we need to share the burden for the speculation of others? I have an overdraft, why dont the banks pay back some of that?
Instead, I am faced with stealth taxes like road tolls on top of road tax, and future additional costs with water metering and property tax on family homes.

Paycuts and levies are applied to the lower and middle ranks of the civil service, not those in senior positions on whose watch the crisis developed.

The citizen should come first, a wider range of the people, not just the bankers and speculators should be bailed out.
I do not understand why banks could not be re-capitalised from the bottom up - i.e. subject to criteria, that people could not have transferred a mortgague from private banks to the state, in essence becoming council houses. As an addition to the National Solidarity bond, they could be regarded as assets for the state. The banks would have got their money and family houses would have been secured.

The long running joke that tells us the only difference between Ireland and Iceland is one letter and six months is true, they are better off after 6 months, their economy is stronger and better than ours and they are not burdened with debts on the public purse for the private sector.

Free Blog Counter

Wednesday, June 8, 2011

Water, A Human Right or an IMF cash cow

Well, water metering and charges are coming - another soft stealth tax.
If Ireland is famous for anything other than bankruptcy, it's soft rain.

What I mean by a soft tax is that it is something that cannot be avoided. We need certain things to survive; they are basic, food, water and shelter. Those are the fundamentals of life, and are not easy to move or source elsewhere.

Air can be covered by a carbon tax, shelter can be covered by a property tax, and water can be covered by metering.

The main aim of metering is of course to raise cash and in my opinion to eventually privatize in order to raise money in the short term to bail out the banks, and to avoid long term issues like pensions and of course, taking responsibility for failings in the system.

In Ireland, the main thing it seems to me is the abrogation of responsibility, where failure can be covered up by bureaucracy and being as obtuse as possible, and it seems impossible to hold people to account for failure in public services and banking.

So, why charge for water - to get money that will be used to service IMF loans that were taken to bail out the banks. I doubt very much that any water charge, be it flat rate or metered, will be ring fenced for improved infrastructure or treatment.

Let’s briefly look at one part of Ireland first – Galway where €21.5 million has been available since 2002 for dealing with the cryptosporidium issue, yet there still are major problems with water supply in one of Ireland’s major residential areas and a premier tourist destination.

It’s now 2011 and still according to the Connacht Tribune there is still ‘Inadequate treatment’ of drinking water for 44,000 people.
Despite the €21m in 2002 and an additional €18.4 million this year from the EPA a total of 32 water sources in Galway are “at risk” of contamination – almost half of these having “inadequate treatment” for the cryptosporidium bug.

This leads to the situation where one part of the government (the EPA) using public funds to prosecute another government agency (Galway CoCo) whose legal fees and fines will be paid for from the public purse!!

With all that money provided, one would think that Galway CoCo would sort things out.
But because of the current situation one can only say the Council is ill equipped to run public water systems efficiently.

Typically for Ireland, no one in Galway CoCo has been held responsible, no questions have been asked, and the county manager with all the other people who should be looking after this are still in place.

With the IMF and World Bank if water services are sold off there is a precedent. It is not the first time that aid or assistance has been made conditional to the privatization - or rather the profitisation - of a substance as essential as water. 

The Bolivian Government turned to the World Bank for help against an economic meltdown – much like us bailing out the banks. The World Bank declared it would not "renew" a $ 25 million to Bolivia unless it privatized its water services.

It seems the World Bank believed that "poor governments are often too plagued by local corruption and too ill equipped to run public water systems efficiently.[and that the use of private corporations] opens the door to needed investment and skilled management"

A 1999 Public Expenditure Review, the World Bank stated that “no subsidies should be given to ameliorate the increase in water tariffs” in Bolivia, i.e. no breaks for elderly or the poor.

Bolivia privatized its water services, giving control to a subsidiary of a multinational.
The multinational demanded, and won, a provision guaranteeing the company an average 16% annual return on its investment, leaving Bolivia's poor to bear all the financial risk – much like our public services are suffering cuts and a risk of privatisation to service the interest on the IMF/EU loans.

To ensure the legality of the privatization law 2029 was passed, which verified the contract and gave a virtual monopoly over ALL water resources.

This included water used for irrigation by peasant farmers, and community-based resources that had previously been independent of regulation and state run water supply.
The law was seen as the sale of water resources that had never really been a part of public service system in the first place, much like our community water systems.

This also included rainwater harvesting – but more about that later.

The corporation could not only install meters and begin charging at independently built communal water systems, but it could also charge residents for the installation of those meters.
This has - in an obtuse way - already happened in Ireland, our taxes are paying for the meter installation program – so a publicly funded metering system is already in place adding value to the product offered if, or rather when, the system is sold to investors.

Between January 1999 and April 2000 parts of Bolivia were placed under martial law following protests against public water systems being sold off to foreign investors and the sheer scale of cost increase.
This needs to be put into context. Bolivian families earning a wage of less than $100 per month were charged $20 for water - an increase at times of 300% - and threatened with having the water shut off.

When thousands tried to march in peaceful protest, then President Banzer - who ruled Bolivia as a dictator from 1971-78 - had police and army hammer protesters.
Those who opposed the water privatization scheme had their homes ransacked and some were flown off to a remote rainforest jail in an effort to silence them.
175 people were injured, two youths blinded and 17-year-old Victor Hugo Daza was shot thorough the face and killed: The ultimate penalty for challenging multinational corporate control of local water supplies

The company who had taken over the water system was a subsidiary of US based Bechtel. Bechtel is a global giant, posting more than $12.6 billion in revenue in 1998 - $2.4 billion on Latin American projects alone

Bechtel sought to pin the blame elsewhere released a statement claiming that "a number of other water, social and political issues are the root causes of this civil unrest."
Moving to shift the blame, a Bolivian government spokesman told reporters the "subversive" protest was "absolutely politically financed by narcotraffickers."

Such labeling is done much in the same way that Shell to Sea protestors in Ireland have been labeled as provo sympathizers by parts of the media.

The But the uprising had nothing to do with drugs: It was all about water, the coalition against the water charges was in fact led by a union representing minimum wage factory workers and including peasant farmers, environmentalists and youth.
The contract made with Bolivia's government was bad from the very beginning, a virtual guarantee that thousands of poor families would be hit with water rates they could not afford - as we are hit with cuts in Ireland.
Bechtel now complains bitterly about that contract, but the fact remains that they negotiated it, signed it and implemented it.

Bechtel workers removed the water company computers and financial and personnel records. Bechtel administrators left behind emptied bank accounts and more than $150,000 in unpaid bills. On top of all this suffering and damage, Bechtel now has the audacity to demand a compensation payment of $12 million from Bolivia.

You might think that a charge, tariff or license to collect rain water is nuts, but its not just in Bolivia that attempts have been made for a such a charge.

Elected public servants in the Washington State Legislature introduced a bill that will require an individual to obtain a permit to collect rainwater on their own property for their own use.

In Ghana someone as supposedly caring as the UK’s Claire Short's true commitment - to a globalised economy run by powerful, mostly western capital - is exemplified by her "development" enterprise in Ghana.
Her department told the Ghanaian government that it would get aid money only if it effectively privatizes the water supply, allowing British and other multinational corporations to make a killing.
Making a killing can be taken literally in Ghana, where more than half the people lack a regular, safe water supply and children die from water-borne diseases. Since a "private-public partnership" was announced, water bills for the poor have begun to rise sharply in order to make the water industry "competitive" so that it can be sold off. The Christian Council of Ghana says that "to privatize water is like handing down death sentences to the urban and rural poor in Ghana, because they cannot afford to pay".

Again in the US Colorado water law holds that every raindrop that falls on the state is already claimed by a water-rights holder.

It is claimed that capturing rainwater could hurt stream flows and thus is akin to stealing.

You see, once water collection and distribution is commercialized, it becomes the intellectual property of the water distributor.

In the UK we have even seen an attempt at a derivitive of a rainwater collection charge - privatised utilities services billed churches and charities like the Scouts for draining away rainwater that fell on their roofs. Protests by the Church and the Scouts Association, which said hundreds of its groups are having to choose whether they organise youth activities or pay their water bills.

Essentially, if the Politicians are pushed, whether you were to collect rainwater or not - you could end up paying companies with a profit motive for - rainfall !!!

In Ireland we have all the right elements, corrupt or inefficient public officials, inept public services, a financial crisis caused by an elite that is used as leverage to create monetary advantage for multinational corporations and a political/media caste who don’t give a damn.

Free Blog Counter

Thursday, June 2, 2011

What went wrong, and what else - the bailout.

OK - we have been bamboozled by bullshit, that is the first point.
Using multi layer words that we are vague about is a means of control, ignorance leads to apathy.

Bondholders, bail outs, front loading etc. are all terms used to confuse and divert questions.

A bondholder is an individual or entity that is the bearer of a currently outstanding and active bond.

A bond is a type of debt capital instrument that is used to generate funds for the issuer.

Debt capital is the capital, usually money, raised through issuing bonds.

A debt instrument is any type of documented financial obligation (i.e. an IOU note) that describes a debt that is assumed by the issuer of the document (i.e the bank)

Our banks wanted money to loan out to speculators, so they issued bonds to raise money.

Other banks and investors saw the bonds on offer with their return rates and bought them as a way to make money in the long to medium term, so they gave our banks cash for IOU's and became bond holders.
Lets call this cash Block Ai

The Banks then took Block Ai and broke it up to give to individuals who speculated on returns - i.e. both parties gambled. Lets call this Block Aii
In Ireland, this was in reality a very small circle of people.

The banks also loaned money to people to buy the houses built by the speculators.
Lets call this Block Aiii

The banks gambled 3 times on Bloc A
- 1: that they would get it back and repay Block Ai
- 2: that the speculators who took Block Aii would pay them back to fund Block Ai and
- 3: that they would get a secondary return from same property through private mortgage debt, Block Aiii

When issuing block Aiii we have seen that quite often this was done in a very slipshod fashion with Government Ministers like Charlie McCreevey getting very large loans with little or no oversight.

To add to the risk factor loans were not really secure. When you borrow a large amount of money you generally are asked for collateral, something you own of value, as a guarantee against the loan in case things go wrong.

In the case of the speculators, they were allowed to use property they did not actually own outright as collateral. They were taking loans on the back of property that was already subject to repayment of another loan.
This is called leverage.

Then part of this precarious system, Block Aii, went pear shaped when repayments stopped and this had a domino effect on the unsecured leveraged loans.

The Government, or more correctly, Brian Lenehan and Brian Cowen, overnight took possetion of the banks IOU notes, this was the deposit garuantee - promising to provide money for loans they did not have.

To cover this potential cost they borrowed more money from the same investors who had supplied the initial speculative capital to the banks.

The investors could then deposit those IOU's in the guaranteed banks, and withdraw the money so the Government gave them back the 2nd loan, and still have to pay off the initial loan with interest.

The Green/FF government borrowed money to pay off a loan.

This was the bailout.

It is clear that when the bond holder loans money to the issuer (us, the tax payer represented by the Government) to cover the initial loan, it is to the benefit of the bond holder as they get a bigger return on the loan.

When they are loaning a secondary amount to get their initial capital and interest rate back, they increase their income by adding to the 2nd loan at higher rates.

In essence, they are loaning us our own money at interest.

Since 2008 there has been an international campaign to socialise debt, i.e. to cover the risks of speculators by penalising the general population.

In order to cover the banks exposure, the IMF and EU made us take out a further loan of €85 Billion.
Among the conditions attached to this are exploitation of national natural assets like minerals, resources and public services by the corporate sector.

We are told that if we do not accept these conditions and provisions the world will collapse around us.

The word default is being used as a scare tactic. Default does not mean we do not pay, it means a negotiated settlement to ride out this economic crisis, and repayments in a sustainable and equitable manner.

This is what the people of Iceland did.

But we the Irish, all 4 million of us, are faced with a per person debt burden that is off the radar, we are dragged by Fianna Fail, Fine Gael, Labour, independents like Lowry and Healy Rae and the Greens into paying for a debt that is not, and never was, our responsibility.

It is an outrageous scam and an unjust act. On the 85Bn loan we each need to pay something like €44K through increased taxes and levies, loss of services and loss of proper revenue from resources - this without the consideration of interest.
In 2013 our annual repayments will be around 9Bn per year - we are per capita the most indebted nation in the EU, with a deficit of 32% i.e. we will need to borrow a further 2.88 Bn per year just to pay a debt caused by a small group of bankers - put into context, that's about twice the amount we spend on the defence forces annually.

If this state of affairs is allowed to persist, we and the next two generations have three choices.
1-Stay here impoverished subsisting on inadequete social welfare
2-If lucky enough to have a job, pay huge taxes for crap services or
3- Get the fuck out of dodge.

If you are reading this, my advice on savings and investments is to move them to an overseas bank, or use an independent bank like Triodos.

The IMF deal will be bad for Ireland, in the Asian economic crisis of the 90's those countries that bought into the IMF policies faced tremendous disruption, those that refused did quite well.
The IMF is a private venture company, supported by multi national corporations who covet resources and income, things like health insurance, oil and gas.

I am not saying that as a conspiracy nut, UNICEF calculates that over half a million children every year under the age of five die due to IMF policies.
As countries are diverting resources away from social provisions like health care and pensions to repay debt, those most affected are the poor, especially women, children and the elderly. UNICEF’s 2000 report says 30,000 children die each day due to poverty.This poverty is generally caused by corruption AND debt servicing at an unsustainable level.

What can we do - well - start here
We need to say No to a conjob - We need to say enough is enough, we need to educate ourselves, empower ourselves and take back our country, our future and that of future generations.

Free Blog Counter