Friday, December 31, 2010

The end of the affair

One of the strange aspects of the Celtic Tiger was the fact that being a fan of Manchester United was considered an essential part of the modern Oirish personality.  None moreso than the Old Trafford Oirish Fan-in-Chief, Bertie Ahern.  So there can no more hilarious coincidence than on the same night that Bertie Ahern retires from politics, with his financial affairs still unexplained, Alex Ferguson has put the boot into Bertie's political lineage, and indeed the lineage of Ireland's natural party of government, Fianna Fail --

The most successful football manager of all time, Sir Alex Ferguson, has declared himself a Michael Collins fan and given his verdict on Eamon de Valera’s controversial decision not to attend the Treaty talks in London in 1921. “He knew he couldn’t win. I’m not sure he wanted a patsy but I’m certainly sure he knew he couldn’t win. Having not been there gave him an authority when he came back to complain and get his power,” Ferguson told RTÉ’s Colm Murray ... Ferguson had no doubts that political opportunism was a primary motive of de Valera’s sending of Collins to London.  “Why did he not go? Think about it. I’m going to sign Eric Cantona and I send Mick Phelan [Manchester United’s assistant manager] to do the deal?”

Incidentally, the city of Manchester plays a pivotal role in Bertie's mysterious personal finances.   A bit like the role that New York City played for de Valera.

Thursday, December 30, 2010

He never left

The new year brings the Irish and British secret government papers release under the 30 year rule.  The year is 1980, which was not a good year for Northern Ireland.  Like the years around it.

Anyway, here's a question.  30 years is a long time ago and one can feel old reading the mentions of names that consumed so much attention at the time but are now "history", yet one name crops up in the papers of someone who is alive and well and very much actively participating in politics today.  Step forward the future TD for Louth, Mr Gerry Adams.  Here via the UK National Archives is one section of a memo that was written for PM Maggie Thatcher in early November 1980 by staff in the direct rule administration in Northern Ireland.  The topic is the hunger strikes.

Intelligence in the days leading up to the hunger strike demonstrated considerable confusion in the minds of the PIRA leadership as how best to use terrorism in support of the hunger strikers. Their dilemma is obvious: can they cajole and bludgeon at the same time? Most recent reports suggest that cajolery is at least temporarily the order of the day. There is, for example, intelligence that attacks on off-duty UDR, RUC and prison officers are to be suspended; and Gerry Adams is reported to have insisted on a disclaimer of the shooting on the UDR woman in Strabane on 9th October.*  How firm this policy is, or how rigorously it can be held to, remains to be seen: and it seems unlikely that it would be sustained indefinitely if only because it is in such conflict with the leadership's earlier determination to intensify the campaign this winter. As a member of the relatives action committee (concerned about the bad publicity of the Strabane murder) put it, "how can we give up the war when that's what they are in gaol for" . What does seem likely is that Adams is giving the most careful thought to how and when best to use terrorism in support of the prisoners. A turning point could be the first death.

As it happens, this was the 1st hunger strike which ended with apparent concessions the next month.  The real trouble would start when the deal fell through in 1981.   Unfortunately with these phased releases, we only know the state of thought of the government in late 1980, which leans towards the view that the strikers could be waited out (as the memo notes, the IRA leadership itself did not expect concessions).  But that set the stage for a disastrous misreading of nationalist reaction to the deaths in 1981.  It's not clear how much the government's perception of Gerry's role played into their assessment.

*the standard chronologies contain no mention of such an attack, but a list from Donegal County Council contains a possibility on 24 October.

Wednesday, December 29, 2010

The test of time

The American Enterprise Institute has a new working paper by Andrew Biggs, Kevin  Hassett, and Matthew Jensen which looks for patterns in successful budget deficit reductions (associated WSJ op-ed).  Specifically patterns in terms of whether sustainable cuts in the deficit relied on tax increases or spending cuts.  The conclusion is that successful deficit reduction programs relied on spending cuts.  One of the successful cases identified by their approach is Ireland in the year 2000. 

And so the puzzle-solving must begin.  Ireland 2000, with Charlie "When I have it, I spend it" McCreevy as finance minister?  We've collected together the relevant economic indicators based on IMF data, along incidentally with the same indicators for the Netherlands and Sweden.  Why those two?  Because they have boringly effective economic policies without any of the splashy initiatives that draw more media attention, and they're good to have handy when Irish politicians trot out the "it wasn't just us" excuse when things went wrong. 

Anyway, that's incidental to the main point.  Here's the then European Commissioner for economic and monetary affairs Pedro Solbes speaking about the Irish economy in 2000 --

In this regard, the experience of Ireland is a striking case-study. The growth rate in the Irish economy in 1999 was four times the euro-area average, while the inflation rate is currently twice the average. The small weight of Ireland limits the implications of this growth and inflation divergence for the euro-area economy and for the conduct of ECB monetary policy in particular. 

However, it poses a major dilemma at the national level. The Irish economy is clearly overheating as the supply-side of the economy is increasingly constrained. The Government has responded by proceeding with their well-established tax cutting agenda in the hope of easing supply constraints - particularly in the labour market. Whatever the merits of this approach may be in a medium-term perspective, the short-term risks cannot be ignored. Inflation rates are accelerating - especially in the sheltered sectors of the economy, for instance the housing market. The decision to pre-commit tax reductions in the next three years - as a supplement to an already generous wage agreement - risks to exacerbate the short-term problem of overheating by further stoking demand. 

In other words, this was an overheating economy and the obsession with tax cuts was making things worse, not boosting supply side potential.  By the following year, the Commission was sounding the alarm bells about Ireland's tax-cut driven boom.  

So what looks in the statistics like a successful deficit reduction effort was in fact the stoking of the fire.  Unfortunately for the Commission -- and for Ireland -- its prescient warnings about a housing and spending boom were 7 years too early, their credibility undercut as a result.

But we have the benefit of hindsight.  Do we still want to go back and declare Ireland in the year 2000 as an example of good fiscal policy?

Thursday, December 16, 2010

Put that man in charge of a central bank

Gulf News (Dubai) --

A blacksmith denied in court yesterday that he had the magic powers to make $25 million fall from the sky by dealing with genies.  Prosecutors accused the 30-year-old Chadian blacksmith of dealing in sorcery and claiming that he had magical powers that could make $25 million (Dh92 million) fall from the sky.

He was additionally charged with possessing $34,000 in counterfeit currency for trading purposes.  "I am not guilty… I did not possess any counterfeit currency or claim any magical powers," argued I.O. when he defended himself before the Dubai Court of First Instance.

Friday, December 10, 2010

FIFA claims Qatar is only hot country in Gulf

Swiss bureaucrat Sepp Blatter in an interview with L'Equipe --

Le président de la FIFA n'exclut pas que «des rencontres aient lieu dans des pays proches» du Qatar.

Neighbouring countries could host matches, something that was not mentioned in Qatar's bid.  Unfortunately, a cursory look at a weather map shows that all the countries near Qatar share its weather, although you could probably find some cooler parts in Iran or northern Iraq, which is presumably not what anyone who voted for the bid had in mind. 
As the Wikileaks document dump shows in another context, it's important to consider the possibility that there is no deep or hidden explanation for the strange outcomes of international relations.  It's just that there's a lot of stupid and superficial people at the top of these organizations.  Sepp Blatter really thinks that 45C weather is just a minor detail in his credential of the first Arab-Muslim World Cup.

Saturday, December 04, 2010

Tom Friedman column

Our taxi driver this evening to an undisclosed airport was a true Ron Paul fan who believes that Sarah Palin, Dick Armey and the Koch Brothers hijacked the movement and that Ireland is getting screwed by unscrupulous puppet masters and the fiat money system.

It is a sign of the times that he was making a good case.

Thursday, December 02, 2010

The first South Asian World Cup

Congratulations to Qatar on getting the 2022 World Cup.  Irish people of a certain age may understand why we'd propose calling it the Sally O'Brien World Cup.  It beats contemplating the alternative universe where the Celtic Tiger hadn't crashed and we'd be today seeing a Fianna Fail celebration of having won the 2018 World Cup with the final to be held in Ryanair Field at Ahern Stadium.

Anyway, if Sepp Blatter can claim with a straight face (as we think he did during the announcement) that Zurich is the international capital of world football, then Doha can certainly claim that by 2022 they'll have some outdoor air-conditioning model figured out.  But here's our free advice to Qatar.  As the picture above from the Qatar News Agency shows, the local "celebrations" apparently consisted of government officials heading to the souks with Pakistani and Indian stores (owners and customers) and handing out Qatari flags. 

Since in all likelihood, at least 80 percent of the population will still be expatriate in 2022, it might be worth treating them as part of the target audience for the event and -- even more of a dream for sure -- hope that some country from South Asia actually qualifies for the tournament.  With all the money sloshing around to finance the preparations, how hard could a little investment in a South Asian fan base and a South Asian team be?  The former is already in Qatar

Wednesday, December 01, 2010

Political restructuring

DUBLIN, 1 December 2010

The world of Irish politics was rocked to its foundations today when the long-standing but distressed financial institution Fianna Fáil announced that it would undergo self-resolution to deal with a mounting (vote) deficit situation.  Under the resolution scheme, the performing parts of the institution would be moved into a new "Recovery Party" while the legacy debts would remain under the existing "Fianna Fáil" umbrella.  Previously unseen party documents referred to the legacy instition as "B&B" which had been thought as a reference to the similarly restructured UK building society Bradford and Bingley, but sources explain that it is in fact a reference to "Brian and Brian." 

It is understood that the legacy Fianna Fáil will fully recognize all losses in a forthcoming election, at which point the unencumbered assets will move to the new institution.  Generous compensation will be paid to senior officials facing separation under the scheme, and this compensation will not be subject to claims by future creditors of the legacy unit.  Mid-level officials in the current unified structure are optimistic that they will not be tarnished by the legacy debts, and are reported to believe that now disillusioned customers will be ready to deal with the Recovery Party on the previous favourable terms, since the legacy debts may also pose problems for competitor institutions.  Resolution is facilitated because most creditors of the legacy institution (the Irish voters) are unguaranteed and unsecured.