Sunday, December 15, 2013
My letter to the NY Times re: Wrong definition of success for the Irish
Re: Hardships linger for a mending Ireland
Re: E.U. ministers stagger toward banking deal
In her recent report on the so-called recovery in Ireland Ms. Liz Alderman makes the mistake of defining success in terms of saving the Irish welfare/regulatory state rather than its people who must live in the real economy. For example, she reports that Ireland now can borrow for ten years at 3.5% rather than 14.5% and Its budget deficit probably is improving, etc. due to higher taxes and some budget cuts. EU leaders are hailing this as success. Yet it is the very same EU policy of monetary expansion and excessive government borrowing that caused the problem in the first place. While the ECB is fighting the false evil of "deflation", meaning lower prices for Irishmen trying to make ends meet, through its zero interest rate policy, it is fueling even more banking moral hazard that already has cost the Irish 10,000 euros per citizen. Mr. Andrew Higgins and Ms. Melissa Eddy report that E.U. ministers are forging a new banking union to "catch bank problems early" and provide a new 55 billion euro bailout fund. There is no way that the EU can catch bank problems early, for the simple reason that it causes them. Furthermore, its new fund will cause even more capital destruction through the process of moral hazard, whereby the banks will take increased risk, knowing that they will benefit from any successes and be compensated for their failures.