No brainers in the news

While rising from my slumber the other morning I was informed by Ms. Ann Doyle (pictured above on the TV News), who was reading the morning news on the radio, that the main item for discussion between Nicholas Sarkozy, the French president, and Mr. Papandreou, the prime minister of Greece, at their meeting in Paris later today, would be the Greek debt crisis.

Well, I said to my wife who, for her sins, is obliged to listen to my musings on these occasions, they’re hardly going to spend the meeting talking about the Ireland – Italy World Cup rugby game, which is due to be played on Sunday (although, to be fair, they might well be interested in whether or not Ronan O’Gara will be in the starting line out for Ireland as, it seems, is every other cognisant human at this stage of our evolution).

My problem is that the above is another example of when we are treated to what my American friends call a no-brainer, as some sort of verbal packaging to contain the real story, which is that a meeting between the two heads of state will take place today in Paris.

The same thing happens when the newsreader says something like: “Gardai have begun an investigation after the body of a man was found with gunshot wounds…”. That’s not news. It would be news if an RTE reporter discovered that the police had decided not to bother with an investigation in such circumstances. Again, the real purpose of the item is to let us know about the murder, so why don’t they just get on with it?

So I have this plea to my many readers in the RTE newsroom – please give a little thought to the way these things are presented. If nothing else, Mrs. Mouse will have less in the way of irascible commentary to put up with as she awakens of a morning.

Complacency and global population growth

An editorial in the Irish Times today (Saturday 24th Sept 2011) notes that, this month, a birth somewhere in the world was responsible for “…tipping the global population over the seven billion mark. Up from a paltry billion in 1804, a mere two billion in 1927, and five billion in 1987”. The piece then goes on to remark, in effect, that Robert Malthus was wrong. This Anglican clergyman postulated that, as population growth is exponential and food production increases only according to an arithmetic progression, the growth in numbers of humans would eventually outstrip the ability of the planet to feed everyone. The Irish Times’s conclusion is based on the assertion that “The world population may have quadrupled in the 20th century, but the calories available per person went up, not down”.

There’s a lot that is wrong with this analysis. Claiming only that the number of people has quadrupled in the 20th century is to totally ignore, or be ignorant of the fact, that growth even as described in the article is indeed exponential. Therefore Malthus got that part of his calculation right. As for the rest, his failure to foresee certain advances in science, agriculture and food technology may only mean that he got his timing wrong, not that the basic thesis was incorrect. The world is after all, as it was in his day, a finite entity.

Something else that Malthus could not have foreseen is the development and growth of birth control. In the Western world this has achieved such as state of acceptance and practice that population rise due to live births hardly exists at all. One interesting exception is here in Ireland. However, we can afford the highest birthrate in the EU because our population density is way below the average. In the USA, growth is almost entirely due to immigration, much of it illegal. China has taken drastic steps to control its population, such as attempting to limit families to a single child and making abortion a government promoted means of supplementing other forms of birth control.

So the population growth that is taking place is in underdeveloped regions – the very areas that can least accommodate it. For this reason, as also noted, life expectancy is low. Most importantly, for the memory of Malthus, this is all too often due to famine or the effects of malnutrition, which is obviously much the same thing.

It does not become us to be too complacent about population growth.

Reports on abuse, and The Separation of Church and State

The Irish Times - Thursday, September 8, 2011

Sir, – Many commentators claim the abuse of children and vulnerable adults in the past was as much the responsibility of the State as it was of the churches that managed the various institutions. Thus Dermot Keogh (Opinion, September 6th) writes: “There were many so-called bystanders when crimes were committed against the weakest and most vulnerable”.

It’s not that simple. Because the professions and the wide section of society mentioned by Dr Keogh, including, most notably, the political establishment and the civil service, were in thrall to the Catholic hierarchy, to a level that seems incredible today, there was really no distinction to be made between church and State. There were, therefore, very few bystanders, and none with any power.

Now that we seem to have an appreciation for democracy and the rights of the individual, we should reasonably expect a long overdue separation of church and State. In particular, we need to reclaim our national schools so that children can, at the level of State involvement in their education, learn how to think, rather than what to think, and thereby avoid the possibility of them being subjected to the disastrous indoctrination that was the lot of their recent forebears. – Yours, etc,

SEAMUS McKENNA,

Book review: Anglo Irish Bank as it was going down the tubes

The essential elements of the Anglo Irish Bank story and the rapid transformation of the man who personified it, Sean “Seanie” Fitzpatrick, from a perceived banking genius and darling of the business press to something of a pariah among his compatriots, are well known by all who have even a passing interest in matters financial in Ireland.

It is, however, as always, fascinating to be able to wallow in the gory details of such a tale. Simon Carswell is a Financial Correspondent with the Irish Times. He seems to enjoy access to the means of providing the kind of inside stories which, when linked together, provide a good account of what happened in Anglo, particularly towards the end.

“Anglo Republic” is reminiscent of the book produced some years ago by Carswell’s colleague at The Irish Times, Fintan O’Toole, on the Beef Tribunal and Larry Goodman called “Meanwhile Back at The Ranch”, although the new book somewhat lacks the literary poise and the finely turned phrase of O’Toole’s work.

The book is a page turner when we arrive at what might be described as the heart of the matter, the behind the scenes activities which became more and more fraught as FitzPatrick and his successor as CEO, David Drumm, found they had to deal with massive capital outflows, a rapidly sinking share price and, above all else, the severe problems caused by Sean Quinn’s ultimately disastrous decision to build up a very large secret holding of Anglo shares using Contracts For Difference (CFDs). Here Simon Carswell comes into his own and his confident knowledge of the details is impressive. Whatever faults David Drumm has, it comes across from Carswell’s material that he at least has a sense of humour.

Of course, in order to make a real contribution, a book such as this must offer some insight into the mechanisms that brought about the catastrophe that was the recent Irish economic collapse. There is a general acceptance that the culprit was reckless lending to property investors and developers, which was initiated by Anglo, who were then copied by other institutions when it became the perception that Sean Fitzpatrick’s operation was earning profits that "properly" belonged to the more established banks. This, however, does not deal with the detail, where the devil lies.

This writer saw a presentation by an Anglo Irish banker some years ago, back when they could do no wrong. The attitude of the presenter was that safe and profitable lending was really very straightforward – three things were required: security, the ability to repay and recourse. The irony is that the cocky presenter was probably correct. The real problems arose afterwards in the execution of the strategy when the principle was compromised, in particular by neglect of the third element, recourse, which means that loans should only have been given to those individuals who were prepared to give personal guarantees and who had a net worth sufficient to cover the repayment in the event that the asset which was the subject of the loan, and which normally provided the security, lost its value, and the ability to repay, for whatever reason, disappeared.

What happened in practice was that the usefulness of recourse was lost in two ways. Firstly, it was not insisted on at all in many cases in the later stages of the operation of Anglo and the other banks and secondly, it fell prey to an insidious development which came about because, over time, when it was in place, it depended more and more on a net worth statement that was itself totally made up of only one asset class, property. Then when all property values were destroyed, so were the means by which recourse could be exercised.

Like many publications of its kind, “Anglo republic” could have benefitted from a bit more editing. Certain parts are overlong, such as that dealing with the genesis of Anglo. And do we really need another meticulous, words-of-one-syllable explanation of how contracts for difference (CFDs) work? At the very least this part could have been confined to a notes section at the back of the book. When tables start appearing in the text it becomes reminiscent of a business report rather than a work of history. There is a charming editorial oversight in chapter 12 when the sentence “Horan also spoke to Morgan Stanley himself” appears, referring presumably to a representative of the financial services firm that was founded in the 1930s by two individuals, now long-dead, whose surnames were Morgan and Stanley.

The conclusion arrived at by Carswell is also probably the right one – that the Anglo lenders were lucky for so long that they began to believe that what was really a flawed business model was actually a gilt-edged strategy. And how many of us are guilty of eventually coming to believe our own propaganda? How many times is it necessary to characterise each lucky break, as Lucy Kellaway once wrote, as a strategic master stroke before the next one becomes for the person responsible something that, somehow, was not luck at all but the working of an inherent, subconscious, natural acumen?

Almost viral

About a year ago I came home one night to find the Late Late show in full swing on TV. Ryan Tubridy had Sinead O'Connor as a guest and she got up to sing a version of Bob Dylan's "The times they are a changing".

I thought it was so good that I recorded it and put it up on Youtube, there and then. But here's the thing - as it was recording I found myself, well, singing along with Sinead. This can be heard on the recording, but only by those who listen to the whole song. Apparently a significant number of people have done this because I've been getting more and more emails commenting on the video, and on my participation.

At the time of writing nearly 80,000 people have viewed my entry. It's the only one I've ever made on Youtube but I'm also now getting emails from seasoned Youtube posters asking if I will link with them on the channel.

It's a funny old world for sure.

More positivity for the Irish economy - why am I worried?

Now I'm worried. So many international pundits have been rushing recently to extol the virtues of the Irish economic recovery that one has to start remembering that we've been here before – and it didn’t work out well.

Think about it. In the mid nineties the term “Celtic Tiger” was coined to describe what appeared to be a runaway success in terms of becoming a prosperous nation in the shortest possible time. We could do no wrong. Retired Irish politicians and business leaders toured the global lecture circuit telling the rest of the world how it should be done. The Irish bought anything that came up for sale, whether it was Polish banks or Chicago real-estate.

The truth of the matter is revealed in this video clip by Alan Mattich of Dow Jones Newswires. Ireland is a small, very open economy. We depend on international trade, much of it carried out by non-indigenous Multi-national corporations that have been attracted here by our corporate tax rate, combined it must be said by the very real facts that we have a sharp, young, well educated workforce, are the only English speaking state in the Euro zone (Memo to government: don’t even think about leaving the Euro or doing anything that might endanger it as a unit of currency) and enjoy the benefits of having one of the most professional and effective development agencies, IDA Ireland, in the world.

But it is so, so easy to lose the run of oneself. Will we be more circumspect this time around? And if so, for how long?

Fiscal Union

In economics, fiscal matters relate to revenues and expenditures, as opposed to monetary matters, which have to do with the relative value of the currency and all that it depends on, such as interest rates and money supply.

In the Euro zone, which comprises of the 17 EU member states that use the Euro as their unit of exchange, the European Central Bank (ECB) has responsibility for monetary matters. It has declared its primary objective in managing monetary policy to be the control of inflation or, to be more precise, inflation expectations. Each individual Euro zone member state is responsible for its own fiscal policy.

If fiscal policy is about revenues and expenditures, then the most important aspect of this has to be decisions about how taxes are raised, which in turn include questions about the activities that should be taxed and at what rates. The other important element of fiscal policy is how money is spent, which means how national budgets are prepared and executed.

At the extreme, full fiscal union would mean that fiscal strategy in the EU would be centralised, just as monetary policy is at present.

For Ireland, under the current bailout agreement with the ECB and the IMF, there is already an element of what might be called fiscal cooperation in place, as both these bodies now have oversight of Irish budgetary provisions. This, however, falls well short of full fiscal union. The most serious block to fiscal union is the determination of the Irish government to hold on to its favourable corporation tax rate of 12.5%, which has been a significant factor in motivating Multi-national Corporations to locate, and in many cases establish their European headquarters, in Ireland. There are well founded fears that fiscal union would result in a rise of the Irish corporation tax rate to a standard, Euro zone wide, percentage. Many other EU states maintain that the relatively low Irish rate confers an unfair advantage in the attraction of Foreign Direct Investment (FDI).

In addition to the above there are many commentators in Ireland who maintain that fiscal union would mean an effective loss of sovereignty for the Irish state. This is surprising, as we have already, and long since, effectively ceded sovereignty by accepting EU directives under legally binding treaties, by convention named after the cities in which they were formulated such as Rome, Maastricht, Nice, Lisbon and even Dublin, in areas of social policy, anti-discrimination measures, consumer legislation and the penal code, to name but some.