bond market diplomacy

booom

first things first; i can't stand Berlusconi. Having said that what are peoples opinions on a democratically elected leader being obstensibly removed from office by the (i'd like to use the word 'wishes', but it doesn't sound right) pressure of bond investors? is this the first salvo in an attack on representative democracy, where it is deemed incompatible with the wishes (ahh, got to use it after-all) of 'the markets'? maybe some board members with longer memories than mine can come up with previous examples?

OS119

booom wrote: »

first things first; i can't stand Berlusconi. Having said that what are peoples opinions on a democratically elected leader being obstensibly removed from office by the (i'd like to use the word 'wishes', but it doesn't sound right) pressure of bond investors? is this the first salvo in an attack on representative democracy, where it is deemed incompatible with the wishes (ahh, got to use it after-all) of 'the markets'? maybe some board members with longer memories than mine can come up with previous examples?

you've (purposefully?) shortened the storyline - the 'markets' (and Germany) didn't get rid of Berlusconi, the elected parliament of Italy got rid of Berlusconi because they wanted continued access to the 'markets' money (the markets don't have to lend to Italy, Italy doesn't have a right to borrow other peoples money at a reasonable rate). you have the right to decide which of your friends you're prepared to lend money to - based, one assumes, on whether they are sensible people or just piss heads - this is the same, Italy decided that it wanted to be a sensible person rather than a piss head so that it would continue to enjoy its friends confidence.

nothing undemocratic in that - the opposite in fact.

Scofflaw

OS119 wrote: »

you've (purposefully?) shortened the storyline - the 'markets' (and Germany) didn't get rid of Berlusconi, the elected parliament of Italy got rid of Berlusconi because they wanted continued access to the 'markets' money (the markets don't have to lend to Italy, Italy doesn't have a right to borrow other peoples money at a reasonable rate). you have the right to decide which of your friends you're prepared to lend money to - based, one assumes, on whether they are sensible people or just piss heads - this is the same, Italy decided that it wanted to be a sensible person rather than a piss head so that it would continue to enjoy its friends confidence.

nothing undemocratic in that - the opposite in fact.

Again, there seems to be this idea that democracy shouldn't have to take account of external circumstances or events, and that if it does so, then, it's not democracy.

Democracy is a method. Silvio Berlusconi was removed democratically, because the Italian parliament decided it was better off without him in order to appear credible to the markets. Had he been removed illegally, say at the point of a gun, that would have been undemocratic.

Having said all that, no, it's obviously a lot less than ideal that the pressure of the markets can produce such effects - but, according to the prevailing economic mantras, the idea is that such pressure is exactly what is needed to keep governments from budgetary recklessness.

That such "market discipline" rather evidently failed to keep government finances in order during the boom, and is now adding to everyone's misery by throwing its weight around in a rather panicky and aggressive fashion, suggests the prevailing economic mantras may be less than satisfactory guides to a happy life.

cordially,
Scofflaw

Hayte

Berlusconi wasn't removed democratically. He was s**tcanned by his own party because he lost his parliamentary majority and couldn't enact anything. He had to resign. Berlusconi may be a hack but hes an elected one. Nobody in Mario Monti's cabinet has been elected but this situation is palatable only because democracy in the first world doesn't exist. Italy is a plutocracy/kleptocracy so brazen that this form of (technical) autocracy is actually preferable to it.

beeftotheheels

booom wrote: »

first things first; i can't stand Berlusconi. Having said that what are peoples opinions on a democratically elected leader being obstensibly removed from office by the (i'd like to use the word 'wishes', but it doesn't sound right) pressure of bond investors? is this the first salvo in an attack on representative democracy, where it is deemed incompatible with the wishes (ahh, got to use it after-all) of 'the markets'? maybe some board members with longer memories than mine can come up with previous examples?

Have you tried googling Italy and Technocratic Governments? They've had a couple since 1990, and they achieved good results in terms of Italy's finances. So this is less of a leap for Italy than it is for most, they've done it before recently enough that most adults can remember it.

Hayte

I suppose but those were very different circumstances. And back then the squid didn't control, uhhh, all of the US and Europe.

beeftotheheels

Hayte wrote: »

I suppose but those were very different circumstances. And back then the squid didn't control, uhhh, all of the US and Europe.

How so? Italy was in a quandry, the political parties were imploding on a web of corruption, the books couldn't be balanced so they replaced their government of elected officials with one of appointed officials to get the mess sorted and then hand it back to the elected officials to mess it up again. Which they duly did.

Since it worked before for Italy, it is less scary for them than if it was some EU (or Goldman Sachs) construct. Italy owns the concept of technocratic governments in modern western Europe.

Hayte

I don't disagree with you but back then the whole concept of fiat currency wasn't about to unravel. I'm not sure that having prior experience with autocratic government is necessarily a good thing for Italy? It may work out better in the short term because it appears to be preferable to the plutarchs and kleptocrats but that really says it all. It suggests that democracy has been dead in the Eurozone for a long time, but alot of us only just got the memo.

beeftotheheels

Hayte wrote: »

I don't disagree with you but back then the whole concept of fiat currency wasn't about to unravel. I'm not sure that having prior experience with autocratic government is necessarily a good thing for Italy? It may work out better in the short term because it appears to be preferable to the plutarchs and kleptocrats but that really says it all. It suggests that democracy has been dead in the Eurozone for a long time, but alot of us only just got the memo.

But democracy doesn't mean the same thing to all people. The interpretations of democracy differ wildly, how it is manifested differs wildly.

We elect TDs and they form a government. We don't actually elect a government as it were, not in the way France or the US elect their president who has the executive powers.

Even if we look at the UK this election aside the FPTP system means people usually elect the government more directly than we do.

Leaving that aside, lets say tomorrow we all decided to vote for a new party ABC and so elected them with a landslide. They decided to introduce a bill which changed our currency to the spud. Can they do this? No, because our currency is in the Constitution so only we the people can change it.

Say they wanted to borrow spuds from the Ukraine, can they do this? Only if the Ukraine is prepared to lend them spuds, and only on the terms on which the Ukraine is prepared to lend.

The difficulty here is that the constitution we're dealing with (in Financial crisis terms) is that of the EU, but we all got a say in joining, and changing those rules. But elected Governments the world over are bound by higher laws, be they constitutions or the EU treaties.

The difficulty here is that the bond markets are viewed as some nefarious vigilantes, when any lender will seek to profit from lending, and any lender will impose terms if their debts look doubtful. It has happened since time immemorial, the fact that it hasn't happened to a first world sovereign in recent memory doesn't make it new, it happened to Argentina, most of South East Asia and Russia in the last couple of decades.

If you borrow these are risks you take. And yes, our democratically elected government could decide tomorrow not to honor any of these debts. But there would be consequences for doing so.

Democracy has never, ever, anywhere, been interpreted as allowing the people do what they will because the magic power of "democracy" can prevent actions having consequences.

Hayte

I dunno. Democracy can be boiled down to majority rule where all citizens have equal voting rights. FPTP is less democratic than any system of proportional representation because it is possible to waste your vote by voting for the "wrong" candidate (i.e. one that can't win). That is why there has been a long history of tactical voting in the UK: voting for a candidate you don't want to ensure you don't waste your vote.

In the case of Italy, no interpretation of democracy can ever apply because Mario Monti simply wasn't elected by any majority (whether it be the majority of citizens or the majority of the elected representatives of those citizens). He was appointed by the President.

I understand the nature of borrowing and risk and the consequences of default. I'm just saying that any control over Italy's financial predicament has long been removed from hands of the citizen majority and even the majority of elected representatives. The number of unelected people in the Eurozone with supreme authority and direct ties to the financial organisations which caused this crisis is deeply disturbing.

beeftotheheels

Hayte wrote: »

The number of unelected people in the Eurozone with supreme authority and direct ties to the financial organisations which caused this crisis is deeply disturbing.

And yet if you look at it, it is the ones who have been elected causing most of the problems, most notably Frau Merkel and Mssr Sarkozy. Remember that Greece alone is tiny, Greece is not big enough to estabilize the entire European economy.

Why are Italy and Spain in play, why did we end up locked out of the bond markets? Because those two determined to "burn the bondholders". Not the unelected Eureaucrats, but those two pandering to their domestic electorates, those two putting the prospect of their re-election over and above possible solutions to the problems.

Ultimately I suspect the history books will view Angela as the woman who destroyed the euro, and she was elected, she has a mandate. But it is from the people of Germany, a people who cannot distinguish economics from morality at the moment.

Why is Europe in a debt crisis? Because, to some extent, the predecessors of those two, pandering to their domestic electorates ran huge deficits, which then meant that the rules on deficit policing could not be applied to anyone.

Their deficits led to credit bubbles in Ireland and Spain where politicians, eager to get re-elected inflated the bubbles with hydrogen.

The ECB and Commission have not done a bad job in managing the crisis, within the powers that they have.

But their powers are limited, in the interests of democracy. Ironic huh?

We need less democracy within the EU, not more, because Angela pandering to her electorate having the power to plunge the rest of us into decades of depression is not a good thing in my book. The power should rest with people whose job it is to look after the whole, rather than those whose job it is to pander to their home country.

If that offends sensibilities then lets make the president of the Commission directly electable by the peoples of Europe, lets increase the powers of the European Parliament. But for god's sake lets wrest some powers back from the Council.

Hayte

I guess it comes down to this: should we be allowed to decide our own fate, for better or worse?

I note that Iceland is poised to remove the last of its capital controls and return to the market. It already has better than EU average growth forcasts and is generating a budget surpluss. With all the talk about loss of faith in the Eurozone to pay its debt, perhaps we would be wise to remember that credit worthiness must come before credit.

We shall see how the Krona auctions play out and that will be the test. I have no problem admitting that everything I have previously posted on this forum with regards to Iceland's default could be wrong and if the auction is successful that will be the ultimate vindication of this statement.

Icelandic citizens nevertheless were allowed to democratically chose their fate. The technical experts chose the mechanism by which they could return to the market after the nation's fate was decided by its people. It remains to be seen whether it was the right decision but I think part of the aversion to Eurozone debt is based on the fact that the domestic policy designed to shore it up (austerity) is hugely unpopular with the citizen majority. As long as these policies remain in place, you will always have civil disobedience and political instability.

I would contend that having the freedom to choose underpins everything. It looks as if the entire Eurozone is destined for capital control anyway so Iceland's model may soon become our model.

oscarBravo

Hayte wrote: »

I guess it comes down to this: should we be allowed to decide our own fate, for better or worse?

If we actually understand what "worse" is, and genuinely make a conscious decision to choose the worse option on principle or for whatever other reason, then maybe there's a case to be made for it.

We decided our own fate by buying the pup that Fianna Fail sold us election after election. I don't think there's any question but that decision was for the worse - but very few people are saying now how great it was that we had free rein to frig ourselves up royally; instead everyone's casting around for someone to blame.

oppenheimer1

beeftotheheels wrote: »

But democracy doesn't mean the same thing to all people. The interpretations of democracy differ wildly, how it is manifested differs wildly.

We elect TDs and they form a government. We don't actually elect a government as it were, not in the way France or the US elect their president who has the executive powers.

Even if we look at the UK this election aside the FPTP system means people usually elect the government more directly than we do.

Leaving that aside, lets say tomorrow we all decided to vote for a new party ABC and so elected them with a landslide. They decided to introduce a bill which changed our currency to the spud. Can they do this? No, because our currency is in the Constitution so only we the people can change it.

Say they wanted to borrow spuds from the Ukraine, can they do this? Only if the Ukraine is prepared to lend them spuds, and only on the terms on which the Ukraine is prepared to lend.

The difficulty here is that the constitution we're dealing with (in Financial crisis terms) is that of the EU, but we all got a say in joining, and changing those rules. But elected Governments the world over are bound by higher laws, be they constitutions or the EU treaties.

The difficulty here is that the bond markets are viewed as some nefarious vigilantes, when any lender will seek to profit from lending, and any lender will impose terms if their debts look doubtful. It has happened since time immemorial, the fact that it hasn't happened to a first world sovereign in recent memory doesn't make it new, it happened to Argentina, most of South East Asia and Russia in the last couple of decades.

If you borrow these are risks you take. And yes, our democratically elected government could decide tomorrow not to honor any of these debts. But there would be consequences for doing so.

Democracy has never, ever, anywhere, been interpreted as allowing the people do what they will because the magic power of "democracy" can prevent actions having consequences.

Ultimately he who pays the piper, calls the tune. Almost all nations use debt markets to pay for stuff. The only true democracy is one that is indebted to no one.

Hayte

oscarBravo wrote: »

If we actually understand what "worse" is, and genuinely make a conscious decision to choose the worse option on principle or for whatever other reason, then maybe there's a case to be made for it.

We decided our own fate by buying the pup that Fianna Fail sold us election after election. I don't think there's any question but that decision was for the worse - but very few people are saying now how great it was that we had free rein to frig ourselves up royally; instead everyone's casting around for someone to blame.

Thats not really fair. The political and financial institutions that caused the financial crisis were incredibly opaque. I don't think you can in good conscious dump the consequences of decisions based on information that private institutions like Anglo Irish Bank deliberately withheld from the public and directly misinformed the public. The electorate has some responsibility for allowing its elected representatives to become so close to financial institutions but the dominant political strategy of the past 3 decades has been to focus group swing voters and sow dissent among political opponents so they destroy themselves. Public political discourse is rarely on point and is notorious for smear campaigns and spin. If the electorate does share the blame for that, it is on diminished grounds.

I agree when you suggest that there is a tendency to cast around for someone to blame and nowhere is that more evident than on this forum with "they take our jobs" and "burn the bondholders" rhetoric. Nevertheless, a collective choice made in the past and based on deliberately false and misleading information does not mean that the citizen majority cedes its own right to self determination. I don't want to misrepresent your argument so I ask: is this what you are suggesting?

Scofflaw

Hayte wrote: »

Thats not really fair. The political and financial institutions that caused the financial crisis were incredibly opaque. I don't think you can in good conscious dump the consequences of decisions based on information that private institutions like Anglo Irish Bank deliberately withheld from the public and directly misinformed the public. The electorate has some responsibility for allowing its elected representatives to become so close to financial institutions but the dominant political strategy of the past 3 decades has been to focus group swing voters and sow dissent among political opponents so they destroy themselves. Public political discourse is rarely on point and is notorious for smear campaigns and spin. If the electorate does share the blame for that, it is on diminished grounds.

I agree when you suggest that there is a tendency to cast around for someone to blame and nowhere is that more evident than on this forum with "they take our jobs" and "burn the bondholders" rhetoric. Nevertheless, a collective choice made in the past and based on deliberately false and misleading information does not mean that the citizen majority cedes its own right to self determination. I don't want to misrepresent your argument so I ask: is this what you are suggesting?

I'd agree that Anglo was opaque, and that it's unreasonable to expect the electorate to have made detailed decisions with respect to the banks.

However, the reason the banks were opaque was that they were allowed to be, and the reason their business model was so dangerous was, again, because it was allowed to be. In both cases, it was allowed to be by the government of the day, who were in charge of regulating the banking sector - and the reason we have banking regulation is because banking is a vital economic function, and because when banks go bad the result is almost invariably hugely costly for the taxpayer.

So we can state that the government had a duty to regulate the banks effectively, and failed to do so. The question, in terms of the responsibility of the electorate, is whether the electorate could have foreseen this failure - and the answer to that depends on whether the governments of the day were overt or covert about their regulatory stance.

Unfortunately for the argument that electorate evades responsibility by virtue of the complexity of detailed banking questions, the government was entirely open about its regulatory stance. It told everyone that it was operating a 'light-touch' regulatory environment, and that this was a great thing, which would remove barriers to prosperity resulting from burdensome regulation - and that, mind you, is in respect of the domestic banking sector, never mind the "Wild West" of the IFSC.

So the government was essentially open about the fact that it wasn't really regulating the banks the government - it sold its regulatory stance to the electorate on the basis that light-touch regulation = prosperity.

Now, either the electorate is competent to make a decision on whether to buy that, or not. It's a high-level, non-detailed, policy stance - the electorate need not know the ins and outs of Anglo's business model to understand the choice being offered there. It's either: (a) the banks are forced to obey a lot of rules and regulations about what they can and can't do in order to prevent them blowing up in our faces; or (b) they're left to regulate themselves, and we trust them not to blow themselves up in our faces.

If the electorate is not competent to make a decision on such a very broad basis, then the electorate is quite simply not competent to make decisions about modern economies, and we should abandon our current model of democracy in favour of God knows what other system.

If the electorate is competent to make a decision on such a very broad basis, then given that they were explicitly told by the government that this was their policy stance, they are responsible for the outcome of that policy stance.

The government of the day didn't lie to the electorate, or deceive them in respect of their stance - they didn't claim they were tightly regulating the banks while not doing so. They said they weren't, and they weren't. Certainly, they were wrong about the outcome of such a stance, but it was up to the electorate to believe them, or to look at the outcome of every previous burst of over-optimistic deregulation, and disagree.

cordially,
Scofflaw

oscarBravo

Hayte wrote: »

I agree when you suggest that there is a tendency to cast around for someone to blame and nowhere is that more evident than on this forum with "they take our jobs" and "burn the bondholders" rhetoric. Nevertheless, a collective choice made in the past and based on deliberately false and misleading information does not mean that the citizen majority cedes its own right to self determination. I don't want to misrepresent your argument so I ask: is this what you are suggesting?

First: what Scofflaw said. Second, apart from policies relating specifically to banks and regulation, the policies that the Irish electorate voted for were the erosion of a sustainable tax base in favour of one based openly on a property bubble, and the purchasing of votes through vastly escalated public spending and expensive exercises like benchmarking.

We voted for a government that promised an economy that could be sustained by either an unending property bubble or massive sovereign debt. That's a decision that we, the electorate, made - for better or worse. And it's the question of whether we should have the sovereign right to make such decisions that's at issue (or at least, that I was addressing).

I guess as long as it's our own money we're squandering, then yes: we have a sovereign right to fritter it. When it's someone else's money that we have the begging bowl out for, then I don't think it's unreasonable to suggest that that person gets a say in what we do with it.

Hayte

Scofflaw wrote: »

However, the reason the banks were opaque was that they were allowed to be, and the reason their business model was so dangerous was, again, because it was allowed to be.

Agreed to a limited extent. I have no problem admitting that 4 years ago I didn't even know what financial leverage was. Even the basics of how our financial system works is not in any school curriculum. I feel as if you are trying to uphold an adhesion like contract where the citizenry is never given the knowledge or the tools required to understand the way our society works, is never given the choice of who to vote for except for bad and worse but is held accountable for the resultant failed business model anyway.

I concede in some measure because I do not believe that ignorance is an adequate defense of my position. My position is that we have taken the hit for the failure of that collective decision and we are as a nation suffering the consequences of it now. Nevertheless that mistake does not mean we should sacrifice self determination in the future. This is more a case of improving public education so that more citizens have the knowledge to see through the spin that makes this failed business model paletable to the electorate.

In both cases, it was allowed to be by the government of the day, who were in charge of regulating the banking sector - and the reason we have banking regulation is because banking is a vital economic function, and because when banks go bad the result is almost invariably hugely costly for the taxpayer.

No argument here.

So we can state that the government had a duty to regulate the banks effectively, and failed to do so. The question, in terms of the responsibility of the electorate, is whether the electorate could have foreseen this failure - and the answer to that depends on whether the governments of the day were overt or covert about their regulatory stance.

Unfortunately for the argument that electorate evades responsibility by virtue of the complexity of detailed banking questions, the government was entirely open about its regulatory stance. It told everyone that it was operating a 'light-touch' regulatory environment, and that this was a great thing, which would remove barriers to prosperity resulting from burdensome regulation - and that, mind you, is in respect of the domestic banking sector, never mind the "Wild West" of the IFSC.

So the government was essentially open about the fact that it wasn't really regulating the banks the government - it sold its regulatory stance to the electorate on the basis that light-touch regulation = prosperity.

The method here is suspect. The first problem I have is the idea of FF being overt/covert in its policy of light touch regulation as if it were a binary choice. I think this is a false dilemma. I do not believe that any government in recent memory has been overt about anything to do with government finance. The language you are using is testament to this because you are talking about removing barriers and obstacles and prosperity. There are literally no implied negative consequences whatsoever. It is therefore an indirect lie and a lie of omission.

In future I do not believe that the majority of citizens should play such a passive role in politics but this is still not an argument for sacrificing self determination. It is an argument for better, more relevant public education.

Now, either the electorate is competent to make a decision on whether to buy that, or not. It's a high-level, non-detailed, policy stance - the electorate need not know the ins and outs of Anglo's business model to understand the choice being offered there. It's either: (a) the banks are forced to obey a lot of rules and regulations about what they can and can't do in order to prevent them blowing up in our faces; or (b) they're left to regulate themselves, and we trust them not to blow themselves up in our faces.

This is another false dilemma. I think your argument is strong up until this point. There are more than 2 choices. Citizens have delegated much of the decision making in public finance to global markets and a professional class of financiers and politicians precisely because it is a full time job. There has to be at the most basic level, a bond of trust between citizens and elected representatives. Elected representatives cannot have interests that are adverse to those of the people they represent. I work in law and we have to discontinue if that bond of trust between client and attorney even begins to fray.

With that said, there is no reason why professional financiers and politicians cannot have autonomy as long as we can identify where conflicts of interest occur and insert legal barriers to prevent them from occurring. Leaving this in the hands of political classes has a history of not working. See the repeated stalling on the establishment of a public register of lobbyists.

If the electorate is not competent to make a decision on such a very broad basis, then the electorate is quite simply not competent to make decisions about modern economies, and we should abandon our current model of democracy in favour of God knows what other system.

Who is competent to make decisions about modern economies on behalf of citizens?

If the electorate is competent to make a decision on such a very broad basis, then given that they were explicitly told by the government that this was their policy stance, they are responsible for the outcome of that policy stance.

I disagree. This is tantamount to saying if you let someone into your home then its your fault if you get robbed. You knew the risk when you opened the door. The thief is responsible for the transgression.

The government of the day didn't lie to the electorate, or deceive them in respect of their stance - they didn't claim they were tightly regulating the banks while not doing so.

This is only true if spin and omission do not count as lies.

oscarBravo wrote:

I guess as long as it's our own money we're squandering, then yes: we have a sovereign right to fritter it. When it's someone else's money that we have the begging bowl out for, then I don't think it's unreasonable to suggest that that person gets a say in what we do with it.

This requires a great deal of explanation as it is not as simply as you imply. For a long time our bicameral system of politics has been used for obstructionism and to starve the beast. The starve the beast strategy makes sense in theory because the idea is that if you deprive the government of revenue (i.e. by slashing tax receipts), a point will be reached where the state must curtail public spending. As it so happens, the state simply continues to spend but simply borrows money on the sovereign debt market.

There has also been very little political incentive to leave a budget surplus to the next government when it is simply better in political terms to let the opposition inherit a disaster which they inevitably fail to fix, thus paving the way for the return of the outgoing government.

As we have seen, Eurozone governments are now so indebted that they are forced to dance to the tune of the market and their ability to even function is incredibly susceptible to market movements.

I do believe that debts should be honoured but the question is at what social cost? National austerity has proven not to work in every nation that has implemented it. I note that Scofflaw's position has not really changed since 2008. Mine has in some respects reversed but we will see how Iceland's return to the market pans out. You could still be proven right if the Krone auctions fizzle out like a wet fart.

Thanks to all for making this a lively and interesting debate.

Scofflaw

Hayte wrote: »

Agreed to a limited extent. I have no problem admitting that 4 years ago I didn't even know what financial leverage was. Even the basics of how our financial system works is not in any school curriculum. I feel as if you are trying to uphold an adhesion like contract where the citizenry is never given the knowledge or the tools required to understand the way our society works, is never given the choice of who to vote for except for bad and worse but is held accountable for the resultant failed business model anyway.

That's because I believe in democracy! That is, I believe that in general, the outcomes of things like elections and referendums represent the genuine choice of the citizens. All my experience in Ireland has suggested that the Irish public are pretty good at getting what they want out of a vote, and that the Irish political classes are generally pretty good at giving them what they want.

At times like this, of course, it's much easier to pretend that it isn;t the case - and there is also, of course, a segment of the Irish political public which has to believe at more or less all times that the Irish public do not in fact really want what they vote for, and are therefore presumably regularly duped and deceived.

I, however, don't believe that - I think the only time the Irish public gets deceived is when it's willing to connive at its own deception.

Hayte wrote: »

I concede in some measure because I do not believe that ignorance is an adequate defense of my position. My position is that we have taken the hit for the failure of that collective decision and we are as a nation suffering the consequences of it now. Nevertheless that mistake does not mean we should sacrifice self determination in the future. This is more a case of improving public education so that more citizens have the knowledge to see through the spin that makes this failed business model paletable to the electorate.

I agree (but see above).

Hayte wrote: »

The method here is suspect. The first problem I have is the idea of FF being overt/covert in its policy of light touch regulation as if it were a binary choice. I think this is a false dilemma. I do not believe that any government in recent memory has been overt about anything to do with government finance. The language you are using is testament to this because you are talking about removing barriers and obstacles and prosperity. There are literally no implied negative consequences whatsoever. It is therefore an indirect lie and a lie of omission.

I don't agree - I'm sure it's what the government believed to be the case. It was also commonly received post-Thatcherite wisdom that such was the case. And to be fair, that deregulatory 'wisdom' produced two decades of almost unprecedented prosperity. Unfortunately, it ignored some other pieces of economic wisdom, such as the idea that busts follow booms.

Hayte wrote: »

In future I do not believe that the majority of citizens should play such a passive role in politics but this is still not an argument for sacrificing self determination. It is an argument for better, more relevant public education.[?QUOTE]

Not really, because no amount of public education makes people more active at a population level. One of history's constants is that only about 5% of the population are politically interested beyond the level of voting.

Hayte wrote: »

This is another false dilemma. I think your argument is strong up until this point. There are more than 2 choices. Citizens have delegated much of the decision making in public finance to global markets and a professional class of financiers and politicians precisely because it is a full time job. There has to be at the most basic level, a bond of trust between citizens and elected representatives. Elected representatives cannot have interests that are adverse to those of the people they represent. I work in law and we have to discontinue if that bond of trust between client and attorney even begins to fray.

With that said, there is no reason why professional financiers and politicians cannot have autonomy as long as we can identify where conflicts of interest occur and insert legal barriers to prevent them from occurring. Leaving this in the hands of political classes has a history of not working. See the repeated stalling on the establishment of a public register of lobbyists.

I'm not sure that's in any sense a refutation of what I said. A better point would be that there are obviously degrees in regulation, but even that doesn't refute my point, because the way that politicians present their regulatory stance is exactly in the form of the dichotomy I've given. Yes, it's a false dichotomy - Irish banks weren't unregulated by any means - but in fact what is important is exactly the attitude encapsulated in the choice as presented. A pro-regulatory stance means a government that will actively look for potential problems and seek to regulate them out of possibility - a pro-deregulatory stance means a government that will not do that, but will trust the banks to do it themselves. It's a simple enough choice - one need not know the details to make the decision when one is delegating the responsibility - the attitude is what's important.

Hayte wrote: »

Who is competent to make decisions about modern economies on behalf of citizens?

Nobody will always make good decisions.

Hayte wrote: »

I disagree. This is tantamount to saying if you let someone into your home then its your fault if you get robbed. You knew the risk when you opened the door. The thief is responsible for the transgression.

That posits the issue as one of deception and crime, which it isn't, except in the over-fevered rhetoric of the political alternative. Treating overt government policy - and one based on mainstream economic wisdom, at that - over a decade as a crime is just silly.

Hayte wrote: »

This is only true if spin and omission do not count as lies.

And that's only true if the omission is deliberate and knowing, and the spin is designed to conceal known deficiencies.

If you want to make a case for that, you're welcome to do so, but it seems to me you're simply stating it as an article of faith. It seems obvious to me, on the other hand, that5 the government genuinely believed that its policies were positive, and was genuinely blind to its downside - something the number of well connected and influential members of society and the political classes caught in the bust seems to support.

Leaving aside the proof you're going to offer that government policy, far from being well-meaning but wrong, was actively intended to damage the interests of the Irish public, and that therefore the government was an active and malevolent criminal, what we're talking about here is delegation of responsibility.

If you delegate responsibility for something to another person, you make the decision to trust the person concerned - a decision usually based on their attitude (if you provide them with or agree a detailed programme, you're not in fact delegating). Rather obviously, you're not delegating anything to a robber who breaks into your house.

Here, the government was explicit about its attitude, or policy stance, in respect of financial regulation - as our agent, it would operate a laissez-faire, light-touch, regulatory environment.

To take an obvious analogy, we might hire a baby-sitter, and we'll take the decision as to who to hire based on their attitude. The prospective baby-sitter might propose a laissez-faire, light-touch attitude, or they might propose to be quite strict. That's important, because we are delegating control of the children to the baby-sitter.

Now, if a baby-sitter promises to be strict, but isn't, and we come back to find the house trashed and the children rushing about maddened with sugar and smeared with excrement, then the responsibility rather clearly lies with the baby-sitter, because they claimed they would do something, and they didn't.

But let's say the baby-sitter explicitly says they'll be laissez-faire, but promises us that even though they won't be disciplining the children, the children will nevertheless behave themselves well simply because they're being treated with trust, and because it's in their own best interests not to gorge themselves on sugar and smear themselves with excrement. Now when we come back to find the house trashed and the children rushing about maddened with sugar and smeared with excrement, it seems to me that we bear a good deal more responsibility for the situation than we did in the first case. We can avoid that responsibility only if we're basically idiots - that is, incompetent to have made such a decision on delegation.

cordially,
Scofflaw

Scofflaw

Hayte wrote:

This requires a great deal of explanation as it is not as simply as you imply. For a long time our bicameral system of politics has been used for obstructionism and to starve the beast. The starve the beast strategy makes sense in theory because the idea is that if you deprive the government of revenue (i.e. by slashing tax receipts), a point will be reached where the state must curtail public spending. As it so happens, the state simply continues to spend but simply borrows money on the sovereign debt market.

I have to assume you're referring to the US there, because that's certainly not something that applies to Ireland.

Hayte wrote:

There has also been very little political incentive to leave a budget surplus to the next government when it is simply better in political terms to let the opposition inherit a disaster which they inevitably fail to fix, thus paving the way for the return of the outgoing government.

Not really, because that assumes that political parties don't operate on the basis that they'll be the returning government, which isn't how they work. Even Fine Gael, despite all the evidence to the contrary, acts as if it will always win the next election.

Hayte wrote:

As we have seen, Eurozone governments are now so indebted that they are forced to dance to the tune of the market and their ability to even function is incredibly susceptible to market movements.

I do believe that debts should be honoured but the question is at what social cost? National austerity has proven not to work in every nation that has implemented it. I note that Scofflaw's position has not really changed since 2008. Mine has in some respects reversed but we will see how Iceland's return to the market pans out. You could still be proven right if the Krone auctions fizzle out like a wet fart.

I'm not sure what that would prove, to be honest. Iceland has had a lot of austerity and an IMF bailout programme. Their return to the bond markets will also be predicated on the fact that they are so small they need not fail.

cordially,
Scofflaw

Dyr

All my experience in Ireland has suggested that the Irish public are pretty good at getting what they want out of a vote, and that the Irish political classes are generally pretty good at giving them what they want.

Based on this, are you an irish citizen?

Scofflaw

Bambi wrote: »

Based on this, are you an irish citizen?

Yup - and old enough to have voted in 10 general elections and 17 referendums. Why?

cordially,
Scofflaw

Hayte

Scofflaw wrote: »

That's because I believe in democracy! That is, I believe that in general, the outcomes of things like elections and referendums represent the genuine choice of the citizens. All my experience in Ireland has suggested that the Irish public are pretty good at getting what they want out of a vote, and that the Irish political classes are generally pretty good at giving them what they want.

How can you believe in democracy in one breath whilst giving up a critical part of it in the next by ceding national fiscal policy to an unelected technocrat?

At least some of the democratic institutions mercifully remain, so that Mario Monti is answerable to both parliamentary chambers and can be subjected to a vote of no confidence. I nevertheless find it very unsettling how many financial industry insiders move in and out of the high echelons of political office and senior executive management at global finance industry giants. This, coming just one month after the collapse of MF Global in the most egregious abuse of financial irresponsibility that I have ever seen. That case not only involved criminally negligent behaviour on the part of its CEO Chairman, Jon Corzine but the company even raided client accounts in a clear breach of fiduciary duty.

I'm not sure how you can suggest that Irish political classes are good at giving the electorate what it wants. The Irish political classes have done what basically every Eurozone government has done - it has built up more credit, more credit risk and more leverage in an era of unlimited cheap leverage courtesy of Central Banks.

The prosperity it created is short lived and comes at the cost of another generation of citizens but that part isn't explained in a publicly accessible manner. I had to figure it out the hard way like everyone else who is bewildered at how the Euro came to this.

Not really, because no amount of public education makes people more active at a population level. One of history's constants is that only about 5% of the population are politically interested beyond the level of voting.

You are probably right, but perhaps this is a good time to brainstorm how we can get this percentage up? I like the way that OWS is getting people active about this sort of thing, getting people thinking about how it works. Its a start anyway.

Hayte wrote: »

Who is competent to make decisions about modern economies on behalf of citizens?

Nobody will always make good decisions.

Not what I asked. I asked: who is competent to make decisions about modern economies? A doctor doesn't always make good medical decisions but they have a level of training and experience that we can reasonably expect them not to make catastrophically negligent mistakes.

And that's only true if the omission is deliberate and knowing, and the spin is designed to conceal known deficiencies.

If you want to make a case for that, you're welcome to do so, but it seems to me you're simply stating it as an article of faith. It seems obvious to me, on the other hand, that5 the government genuinely believed that its policies were positive, and was genuinely blind to its downside - something the number of well connected and influential members of society and the political classes caught in the bust seems to support.

That is almost worse. Unfortunately, whenever you screw up, it is always better to be seen as ignorant rather than belligerent. Its irrelevant really if nobody can ever tell the difference.

Leaving aside the proof you're going to offer that government policy, far from being well-meaning but wrong, was actively intended to damage the interests of the Irish public, and that therefore the government was an active and malevolent criminal, what we're talking about here is delegation of responsibility.

...

To take an obvious analogy, we might hire a baby-sitter, and we'll take the decision as to who to hire based on their attitude. The prospective baby-sitter might propose a laissez-faire, light-touch attitude, or they might propose to be quite strict. That's important, because we are delegating control of the children to the baby-sitter.

Now, if a baby-sitter promises to be strict, but isn't, and we come back to find the house trashed and the children rushing about maddened with sugar and smeared with excrement, then the responsibility rather clearly lies with the baby-sitter, because they claimed they would do something, and they didn't.

But let's say the baby-sitter explicitly says they'll be laissez-faire, but promises us that even though they won't be disciplining the children, the children will nevertheless behave themselves well simply because they're being treated with trust, and because it's in their own best interests not to gorge themselves on sugar and smear themselves with excrement. Now when we come back to find the house trashed and the children rushing about maddened with sugar and smeared with excrement, it seems to me that we bear a good deal more responsibility for the situation than we did in the first case. We can avoid that responsibility only if we're basically idiots - that is, incompetent to have made such a decision on delegation.

Delegating responsibility doesn't mean if you get burned you have to suck it up. A trustee or a person granted a power of attorney cannot screw the person that gave them wide ranging powers to act on their behalf without serious legal consequences. There are also serious consequences for trustees or attorneys who are grossly negligent in their duty of care.

This is a far more appropriate analogy than that of a child in the care of a baby sitter because a child will at some point grow up and learn personal responsibility. It also more directly ties to the personal relationship and the social contract between a citizen and the elected representative, who has been given a mandate.

I also never stated that government policy has been deliberately engineered to screw citizens. I stated that spin has been deliberately engineered to make any government policy palatable, even when the effect of such policy is to the extreme detriment of citizens. One can argue that the IMF bailout was necessary for reasons of investor confidence but the more I think about it, the more I realize it was and is utterly absurd. It is a plan designed to alleviate national debt and over leveraged financial institutions with more debt and even more leverage. What we are doing is not working. So lets keep on doing the same except more and faster. Theres only one way this can really end and thats with default and capital controls. Calling it now.

If you delegate responsibility for something to another person, you make the decision to trust the person concerned - a decision usually based on their attitude (if you provide them with or agree a detailed programme, you're not in fact delegating). Rather obviously, you're not delegating anything to a robber who breaks into your house.

You are correct and I retract my statement.

View

Hayte wrote: »

I dunno. Democracy can be boiled down to majority rule where all citizens have equal voting rights. FPTP is less democratic than any system of proportional representation because it is possible to waste your vote by voting for the "wrong" candidate (i.e. one that can't win). That is why there has been a long history of tactical voting in the UK: voting for a candidate you don't want to ensure you don't waste your vote.

In the case of Italy, no interpretation of democracy can ever apply because Mario Monti simply wasn't elected by any majority (whether it be the majority of citizens or the majority of the elected representatives of those citizens). He was appointed by the President.

Most Prime Ministers (and Ministers) are appointed to office after receiving the support of the majority of their respective Parliaments. Monti, I believe, did receive the support of the majority of the elected representative of those citizens prior to being appointed to office by the Italian President. This is in accordance with the provisions of Italian constitutional law and has been used previously in Italy.

Scofflaw

Hayte wrote:

How can you believe in democracy in one breath whilst giving up a critical part of it in the next by ceding national fiscal policy to an unelected technocrat?

Because what makes a Minister - or more broadly the government - democratically accountable is not the fact that he or she is personally elected. In fact, because constituency elections are largely determined by local issues, that's about the last thing that works.

What makes a government or Minister democratically accountable is that he/she/it can be appointed or dismissed as a government or Minister by either the electorate or their representatives.

It doesn't matter whether the person concerned has been personally elected or not (if anything, it's slightly better if they're not) - all that matters is that if they're not up to scratch at their job they can be dismissed. That's what democratic accountability is - a system of holding the government and its Ministers to account by democratically elected representatives.

We don't have such a system. Instead, we elect a bunch of local representatives, and the head of the winning party then appoints some of those representatives to be Ministers - the Ministers in Cabinet are "the government". Courtesy of the whip system and the party's control of appointments, the party boss and his inner circle of favourites do not in fact have to answer to the Parliament, because they automatically control Parliament. So there is no individual democratic accountability for Ministers, and barely any government accountability, in the Irish system. You can be an utter disaster as a Minister, and still get re-elected as a TD - and still get re-appointed as a Minister even though you're a cretin because you're part of the party boss' circle of favourites. You can be a disaster as a government, and still be the majority party in the next parliament because people like your local representatives as local representatives.

And even if the Dáil were more independent, it would be largely meaningless, because the Dáil cannot unseat an elected TD, because they cannot override the mandate of the people who put him there.

So even if, say, Mary Coughlan or Conor Lenihan is utterly useless, they can be appointed Minister by pure favour of the Fianna Fáil leader, can't be dismissed by the Oireachtas, can't be dismissed by the electorate, and cannot be put in a position where they are ineligible for a return to a position as Minister at the whim of the Fianna Fáil leader even if they were put out of office after some monstrous gaffe. Instead of a system of democratic accountability, therefore, what we (and the UK) have is the press, who do a better or worse job of filling in the position of democratic oversight that by rights belongs to the Oireachtas - but they're not democratically accountable themselves.

That's the thing, you see - Ireland has a stupid and badly bent system. Holding it up as a measure of other countries can make one think that the other countries are in some way undemocratic, but the problem is the measure, not the measured. We are the ones who have it arseways.

So if you take, for example, the European Commission, that's a properly accountable body in a formally and constitutionally meaningful way. It's answerable to the European Parliament, who are separate from it, not appointed by it nor they by it - but they have the power to dismiss it if they feel it's not doing its job. Ideally, individual Commissioners should also be dismissable, but since the Commission is a collegiate body anyway, that's not strictly necessary. So the fact that they're appointed isn't important, because they're democratically accountable to our elected representatives. If, on the other hand, they were themselves elected, then they would be answerable only to whatever constituency elected them, and would have a mandate which the Parliament could not set aside.

So I have no issues at all handing decision-making over to democratically accountable technocrats. I have a problem handing over decision-making to a bunch of ignorant gombeens who get elected because they fix the roads in their constituency and are appointed as Ministers by their party boss on the basis of their prowess as party fund-raisers and bootboys.

cordially,
Scofflaw

oscarBravo

Scofflaw wrote: »

That's the thing, you see - Ireland has a stupid and badly bent system. Holding it up as a measure of other countries can make one think that the other countries are in some way undemocratic, but the problem is the measure, not the measured. We are the ones who have it arseways.

This is one of those posts I wish I could thank more than once.


(Cue the "patriots" who will describe you as "self-hating" for having the temerity to find fault with anything Irish.)

Amtmann

A powerful post from Scofflaw. You, sir, have my respect.

cyberhog

Scofflaw wrote: »

Democracy is a method. Silvio Berlusconi was removed democratically, because the Italian parliament decided it was better off without him in order to appear credible to the markets.

You put lipstick on a pig, it's still a pig.

"Mario Monti has failed so far to impress bond markets he has the power and authority to do what is required," said Louise Cooper, markets analyst at BGC Partners. "I don't rate his chances either."

http://www.cbc.ca/m/rich/business/story/2011/11/25/italian-bond-yields.html

cyberhog

oscarBravo wrote: »

This is one of those posts I wish I could thank more than once.

Tremelo wrote: »

A powerful post from Scofflaw. You, sir, have my respect.

Ahh Scofflaw... looks like you've got yourself some admirers!

meglome

cyberhog wrote: »

Ahh Scofflaw... looks like you've got yourself some admirers!

It's all that fact, evidence and logic he uses. It's some sort of nerd aphrodisiac. People actually follow him around like the pied-piper, they send him in to de-nerd an area.

oscarBravo

meglome wrote: »

It's all that fact, evidence and logic he uses. It's some sort of nerd aphrodisiac.

Yup. It's a rare and precious attribute on Internet discussion forums these days.

meglome

oscarBravo wrote: »

Yup. It's a rare and precious attribute on Internet discussion forums these days.

It sadly is. With the comments sections now available in the Independent and the Journal the ranting has got worse. Their moderation is based around libel or obscenity but certainly not around accuracy. This has attracted a certain type of poster who's happy to rant down differing opinions without actually posting any evidence. You find many uber nationalists floating around back slapping each other.