Respectfully submitted by Lawrence E. Rafferty (rafflaw)- Guest Blogger
Everyday we read about the latest call for drastic cuts in government spending and claims that our national debt is killing us. Those calling for the cuts claim that austerity is the only way that we can get the economy moving again. To that end they call for cuts in Social Security, Medicare, SNAP and many other assistance programs, but consistently refuse to cut our immense defense budget. Where else have these calls for austerity been made into law and what are the results of these programs?
If you look to Ireland, you can see just one example how austerity has brought a country and its people, to their knees.
“Today, Ireland is under a different sort of tyranny, one imposed by the banks and the troika—the EU, ECB and IMF. The oppressors have demanded austerity and more austerity, forcing the public to pick up the tab for bills incurred by profligate private bankers.
The official unemployment rate is 13.5%—up from 5% in 2006—and this figure does not take into account the mass emigration of Ireland’s young people in search of better opportunities abroad. Job loss and a flood of foreclosures are leading to suicides. A raft of new taxes and charges has been sold as necessary to reduce the deficit, but they are simply a backdoor bailout of the banks.” Nation of Change
How did Ireland get into this immense cavern of debt? Irish leaders decided that it was in the best interest of the country to bail out its failing banking system and guaranteed all of their banks deposits, loans and bond liabilities. Where have I seen that played out before? Once the Irish made that guarantee, the country’s economic troubles got worse.
It was only a very short time before the results of the bank guarantees came to fruition. “Within two years, the state bank guarantee had bankrupted Ireland. The international money markets would no longer lend to the Irish government.
Before the bailout, the Irish budget was in surplus. By 2011, its deficit was 32% of the country’s GDP, the highest by far in the Eurozone. At that rate, bank losses would take every penny of Irish taxes for at least the next three years.” Ellen Brown
The Irish bankruptcy got even worse when it was forced to borrow bailout funds from the European Union and the International Monetary Fund. The bailout required the Irish government to make drastic spending cuts.
“To avoid collapse, the government had to sign up for an €85 billion bailout from the EU-IMF and enter a four year program of economic austerity, monitored every three months by an EU/IMF team sent to Dublin.
Public assets have also been put on the auction block. Assets currently under consideration include parts of Ireland’s power and gas companies and its 25% stake in the airline Aer Lingus.
At one time, Ireland could have followed the lead of Iceland and refused to bail out its bondholders or to bow to the demands for austerity. But that was before the Irish government used ECB money to pay off the foreign bondholders of Irish banks. Now its debt is to the troika, and the troika are tightening the screws. In September 2013, they demanded another 3.1 billion euro reduction in spending.” Nation of Change
The cuts and austerity measures required by the EU-IMF sound familiar to me. Privatize government assets and bailout the banks who were the original cause of most of the economic hardship and everything will be peachy keen. It seems clear that these required austerity measure have not restored the Irish economy.
If you research the issue, austerity has never brought any country back from financial collapse. All it does is reward the bankers who gambled the depositors funds and private corporations who jump in to purchase valuable public infrastructure for a pittance. One former IMF official confirms that history shows us that an austerity program has never succeeded in rehabilitating an economy.
‘ “The only instrument left to address this in the short term is the fiscal instrument and that requires complete rethinking of how aggressive and how persistent the austerity has to be,” Mr Mody said.
There was “not one single historical instance” where austerity policies have led to an exit from heavy debt burden. Changing policies could possibly lead to growth, reduce debt levels and also prompt a “psychological boost” for the economy, he added.’ ” Irish Times
Can we learn from the tragedy in Ireland? Their efforts to cut their way to prosperity have failed miserably and I submit that the calls for austerity in this country are asking for the same result.
A professor at Denison University in Ohio, Dr. Fadhel Kaboub, also suggests that austerity has not worked in Ireland and will not work. ” Austerity measures are not only incapable of solving the sovereign debt problem, but also a major obstacle to increasing aggregate demand in the eurozone. The Maastricht treaty’s “no bail-out, no exit, no default” clauses essentially amount to a joint economic suicide pact for the eurozone countries.” Nation of Change
When you read about demands of sequestration cuts and cuts to food stamps and Social Security and Medicare, do not forget that this is all part of an austerity program. Ask any Irish citizen how that worked out for them. They are now investigating public banks to aid them in breaking the chains created by austerity. Can the United State learn a lesson from the austerity programs in Ireland and the rest of the European Union?
What do you think?
Austerity didn’t work for Greece either. Al it did was turbocharge the ascendancy of their neo-nazi party, the Golden Dawn. I think of Greece when I see the rise of the radical right in the US.
Something that doesn’t bode well for the future IMO, a key provision of Dodd-Frank was repealed last week setting up another, future, bailout demand:
“The bill, which passed by a 292-122 vote, would repeal a requirement in the Dodd-Frank law that big banks “push out” some derivatives trading into separate units that are not backed by the government’s insurance fund.
…. “America’s economy remains stuck in the slowest, weakest nonrecovery recovery of all times,” said Representative Jeb Hensarling, Republican of Texas, the chairman of the House Financial Services Committee. “Those who create jobs for America are drowning in a sea of red tape preventing them.”
But opponents of the measure said that reckless activity by banks like JPMorgan Chase, where a group of traders in London ran up $6 billion in losses in 2011, demonstrate that the tough requirements contained in the Dodd-Frank law, passed in 2010, should not be weakened.” continues
http://dealbook.nytimes.com/2013/10/30/house-passes-bill-on-derivatives/?_r=0
Blouise, unfortunately through most of Ireland’s history (especially post Brian Boru) Ireland has usually had to carry the weight alone.
” The lazy ass citizen is more than willing to trade a vote for not being responsible to provide for his/her own way in the world.”
If that is true, the ‘lazy ass citizens’ are amazingly ineffective at getting value for their vote.
Since the Clinton years social welfare programs have declined not increased.
The large expenditure for social welfare programs since 2007 in the US have had nothing to do with increasing eligibility for benefits and everything to do with providing for people left jobless for reasons beyond their control.
Large deficits can be, largely, traced to reductions in tax rates and huge unfunded projects such as the ‘off the books’ war in Iraq.
Put the tax rate back where it was in the late 1990’s and provide temporary taxes to pay for war as we go and the deficits disappear.
I find it hard to believe that ‘lazy ass citizens’ really intended to give plush corporations a free ride and wage war after war to be paid for by future generations.
But that is what they got.
Very true, Rafflaw. I have several family members who live just outside of Dublin. Between their stories and reading the Irish Independent, I’m going to have to find another country to retire in (Sweden is begining to look mighty promising.).
Why does the government of Ireland (and of the United States) owe so much to the banks? Because in return for votes to keep them in power the politicians promise to provide for every daily need or better yet “Want” of the lazy ass citizens’ lives, so they borrow from the banks via bonds and other government financial instruments. The lazy ass citizen is more than willing to trade a vote for not being responsible to provide for his/her own way in the world.
Again “Iceland” as the model:
http://www.theguardian.com/world/2013/oct/06/iceland-financial-recovery-banking-collapse
Iceland rises from the ashes of banking collapse
Populist programme of new government includes a squeeze on foreign creditors as country emerges from years of instability
[selected excerpts: …read the entire article @ link)
By Simon Bowers in Reykjavik
The Guardian, Sunday 6 October 2013 14.38 EDT
“The previous government had twice negotiated terms under which Iceland would repay the UK and the Netherlands, with interest, for the cost of bailing out Icesave savers. It was made plain to ministers at the time that continued IMF support depended on such a deal.
But both proposals, despite being passed by the Icelandic parliament, were overwhelmingly defeated in public referenda…”
(Subsequently):
“As the first country to experience the full force of the global economic crisis,” the IMF said, “Iceland is now held up as an example by some of how to overcome deep economic dislocation without undoing the social fabric.”
It appears that some of the exaggerated concern for deficits in this country is in reality an ill concealed attempt to dismantle the social safety net.
The recent rapid growth in social welfare expenditures are due, largely, to the deepest recession since the 1930’s not to changes in eligibility rules. These programs are doing exactly what they are designed to do under current economic circumstances. And that is an exceptionally good thing for two main reasons. First these programs directly protect individuals and families in their time of need. Second these programs inject needed demand directly into the economy, acting as a sort of economic shock absorber, lessening economic decline.
OS,
Thanks for the great video of a great song.
Bruce,,
Clare Daly is my new hero!
How Iceland Defeated Bankers
http://www.youtube.com/watch?v=TP1J3HXOZIc
(excerpted from Youtube printed narrative)
“The lesson here is instructive across the pond, but it is a chilling one. If the U.S. — or any sovereign for that matter — attempts to restructure their debts, or to force private investors to take a haircut on their own foolish gambles, these international institutions have promised the equivalent of economic war in response. However, the alternative is for representative governments to sacrifice their independence to a cadre of faceless bankers who share no allegiance to any nation.
It is the conflict that has already defined the beginning of the 21st Century. The question is whether free peoples will choose to remain free, as Iceland has, or to submit.”
Clare Daly Explains….
http://www.youtube.com/watch?v=YbLJgvpmu54
(warning: explicit language is used on the tape recordings released)
What Jamie Dimon said.
Ireland has been on the short end of the stick more than once. During the great potato famine, Irish farmers were producing, but the government was selling that produce abroad. Irish people were starving while ships loaded with food were leaving the docks.
The Fields of Athenry is an Irish folk ballad. The setting is the Great Irish Famine of 1845-1850. The words are those of a man named Michael from near Athenry in County Galway. He was “sentenced to transportation” to Botany Bay, Australia. His crime? He stole some corn to feed his starving family. The English regarded sentencing to transportation only about one step lower than execution. The poor convicted wretch is torn from his family and sent by prison ship halfway around the world to a colony, never to return. Michael had been sentenced for, “stealing Trevelyan’s corn.” This is a reference to Charles Edward Trevelyan, a senior British civil servant in the administration of the Lord Lieutenant of Ireland. Trevelyan believed the starving Irish could subsist on maize. Maize was a grain they had no knowledge of, and did not even know how to prepare it for cooking. One of my wife’s favorite Irish tenors was Daniel O’Donnell. This beautiful and haunting ballad is one of his best:
Irish MP Clare Daly: Why are the Irish people being punished for the bankers’ greed?
Bruce,
Thanks for the Ellen Brown article link.
http://seekingalpha.com/article/1800182-the-bank-guarantee-that-bankrupted-ireland
“When the indomitable Irish spirit is awakened, organized and mobilized, the country could become the poster child not for austerity, but for economic prosperity through financial sovereignty.” Ellen Brown
The Bank Guarantee That Bankrupted Ireland by Ellen Brown
Nov 3 2013, 05:24 | 8 comments |
http://seekingalpha.com/article/1800182-the-bank-guarantee-that-bankrupted-ireland
Standard feed the rich and starve the poor economic mentality. In US the GOP and spineless dems found it easy to cut food stamps to children, the poor and the needy while they will fight to near exhaustion to make sure the wealthy are not ‘burdened’ by increased taxes. or the military industrial complex shedding one dollar of budget. As Annabelle Park (storyofamerica.org) noted, “Let us be clear about our choice. When we raise taxes on the wealthiest Americans, no one dies. When we cut Social Security and Medicare (and now food stamps) people die.” Same is true of Ireland or any other nation.
As Sen Durbin realized “And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill (and the EU for that matter). And they frankly own the place,”
Banksters have not been punished for their economic crimes and simply escape punishment by having the shareholders pay any penalties imposed by purposely weak, revolving door oversight agencies. Without adequate and real punishment – the behind the bars type – this economic injustice will continue unabated, be it Ireland or US.
But didn’t the German financial institutions play a marked roll in this mess? Ireland shouldn’t have to carry that weight alone.