More on Ireland

John McManus has a good piece in the Irish Times. Here is an excerpt:

WHEN THE history of Ireland’s banking and fiscal collapse comes to be written, the role of the European Central Bank may well turn out to be the most controversial.

The question will be whether they really were some sort of honest broker who in the end forced us to confront our predicament or were they in fact the villain of the piece?

Both narratives have some resonance but the former is very much in the ascendant. The weary relief that characterises most people’s response to the arrival of the ECB, the European Commission and the International Monetary to negotiate a loan for Ireland is consistent with the view that time has finally been called by impartial outsiders on our botched effort to sort out the mess we have made of the Irish banks and our finances.

The main elements of the story are that the banks’ problems are so deep that they exceed the fiscal capacity of the State. We cannot borrow enough money from the bond markets to sort them out and also fund the exchequer deficit, so we have no choice but to turn to the European Financial Stability Facility and the IMF.

While the later point is unfortunately true, the role of the ECB in how we came to this sorry pass is worthy of some scrutiny. A more critical analysis might conclude that its policies over the last two years added greatly to our problems and ultimately its own. And it is the ECB’s problems as much as ours that brought things to a head last week.

Read the whole thing.

2 responses to “More on Ireland

  1. If there are cir. $7-8trillion worth of gold in the world (165,000 metric tons = 5,323,000,000 troy oz @ approx. $1,400/tr. oz), I am puzzled how such an amount would support a world economy worth $65 trillion (or for that matter even the U.S. economy which is worth $14-15 trillion … Furthermore, 50% of the world gold is private hands, mostly in South Asia.
    … Also – who is behind the commodity money – private banks, like those in the Fed Reserve System? Or, is it the government?
    How would we fix the price of such a scarce commodity? Those who hoard it can always expand or contract its supply and thus manipulate its price. Governments may have too little leverage to keep the price stable … This spells inflation/deflation cycles (booms and busts), depressions …

  2. Pingback: Does Trichet Understand Inflation? | The Everyday Economist

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s