A Corporate Death Penalty

Here at In Case You Missed It we like to fess up to our mistakes, errors, follies and bone-headed pleas whenever we can. A couple of years back we published one of our most popular posts titled Rent Seeking Parasites which accused the financial industry of parasitism, getting a free ride on the backs of its host, society - you and me. While this seemed a reasonable metaphor at the time operating as we were under the assumption that regulation and taxes would have to be reintroduced to curb their feeding excesses eventually, it has proven wrong. Parasites they are not - they are parasitoids, creatures that similarly live off the back of their hosts but eventually return the favour by killing them.

Don't you dare roll your eyes at the thought of another climate change, anti-oil screed, I promise to not even go there, even though it's the easiest path to prove our faith and reliance on crony capitalism and corporations is suicidal. No, instead we'll start in Greece, a country that's been forced to live under the indignity of not only being labeled one of the PIIGS but the worst of the bunch, a profligate, lazy, early-retiring, ouzo-swilling, tax cheater that built a shack out of straw. Despite the falsity of the stereotype or how they actually got in over their heads in debt, the Greeks have been pushed into debt-slavery, a no longer sovereign nation forced to accede to the austerity demands of the troika, the EU/ECB/IMF.

Strangely enough, these policies have not only led the Greek economy into a vicious debt trap circle - reduced spending leading to lower growth and the need for more borrowing to bridge the budget gaps provoking further calls for deeper cuts - but they've also effected people in the same depression-inducing way. Gross domestic product in the second quarter was down more than 7% from last year amid government spending cuts and tax increases that, combined, will add up to about 20% of GDP while unemployment is over 16%. Predictably, crime, homelessness, emigration and personal bankruptcies are on the rise. Tragically, as a result of these market forces, recorded suicides have roughly doubled since before the crisis to about six per 100,000 residents annually according to the Greek health ministry and a charitable organization called Klimaka.

The Greeks aren't alone in the suffering being induced in order to pay off the often fraudulent debt incurred in order to keep the financial ponzi scheme afloat while suffering under the humiliation of taking orders from the financial markets and their lackeys. Ireland's pot-o-gold bank guarantees led to overnight insolvency and a double austerity dose causing another mass emigration, Portugal's ignominious acceptance of the same troika treatment will produce the same cure as Ireland, Italy had their debt downgraded despite cutting, re-cutting and then cutting the budget some more to please the market wolves while Spain not only had a gun held to their head by the same hit men until they changed their constitution to 'limit' debt without a referendum a month before an election but also had to increase 'labour market flexibility', an Orwellian moniker which will somehow create more employment by making it easier to fire young workers. When markets attack French banks, rules are changed to protect them, but the assault on society causes lives to be lost when fruit stand owners use gasoline to light themselves on fire to draw attention to problems in Tunis or mix it with beer to literally drown their sorrows in Athens or when there's riots on the streets of London. The worst off seems to be Latvia, the anti-Iceland of Europe, a country that could become the first murder victim of neoliberal austerity measures.

Yet German bank inspired bailouts provided by the European Financial Stability Facility and the European Financial Stabilization Mechanism won't solve the problem, it will continue indefinitely without debt forgiveness. Ironically, these obligations being forced on the public will serve the same function as that of the war reparations forced upon Germany after the Treaty of Versailles when John Maynard Keynes warned the world that the "policy of reducing Germany to servitude for a generation, of degrading the lives of millions of human beings, and of depriving a whole nation of happiness should be abhorrent and detestable...even if it does not sow the decay of the whole civilized life of Europe". I think we can all still remember the seeds that were sown and how many lives were reaped thanks to that plan. 

In America we need to be granted a little bit of poetic license to expand the metaphor a bit, after all it is the land of the ever-expanding waistband. According the the General Accountability Office, the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and around the world over the past couple of years. This goes along with the $1.2 trillion in slightly less secret back door loans we later found out about last year or the (only) $700 billion TARP money a couple of years back that everyone talks about. Hurray, the corporatocracy was brought back to life thanks to the politicians they paid for! Funny thing is this transfer of wealth hasn't trickled down to the people yet, nor have the efficiency gains of the past 30 odd years of economic growth. No, the result of the neoliberal free market driven policies of major tax cuts for high-income Americans, union-busting, aided and abetted by federal policy, and financial deregulation such as the repeal of Glass-Steagall, which has fed inequality because very high incomes come disproportionately from that sector, has strangely enough only benefited those the policies were meant to help, the rich and the corporations. Median incomes adjusted for inflation have fallen over that time while the number of Americans below the poverty line has reached 46 million with 21.6% of American children now living in poverty (predicted to hit 25% soon; it's 3.7% in Denmark). The very corporations who the Fed helped out instead of people are often making record profits from this poverty and play a part in the bloodbath, as this poverty is a death sentence.

Instead of using this infusion of cash along with the access granted to US and non-US banks and corporations to near-zero financing at the Fed window to you know, create jobs, financial firms have used it to increase our suffering while lining their pockets. They've thanked the people who cover their losses by betting on their death and creating new casino-like commodity markets, hurting the poor most as increases in the price of rice and gasoline hit them harder. The flip side of the profit prospect created by wheat price volatility for a corporation is starvation for the world's dispossessed thanks to the increased price of bread. A food system where Americans waste enough food everyday to fill the Rose Bowl is great for those who can afford the luxury. For those that can't, well, you know. Worse, a McDonald's corporation that took part in the $1.3 trillion short term lending bonanza gets to serve $5 Big Mac meals thanks in large part to the billions in corn subsidies lavished by the government in support of the unholy alliance of agribusiness and science to produce high-fructose corn syrop (HFCS) and ethanol to put in everything from french fries to feed for filet-o-fish or filling the Ford Fiesta.



The subsidies have manufactured a price inequality that helps junk food undersell nutritious-but-unsubsidized foodstuffs like fruits and vegetables. The end result is that budget wary consumers are increasingly forced by economic circumstance to "choose" the lower-priced junk food that their taxes support. The aggregate effect of such market manipulation across the agriculture industry is "that a dollar [can] buy 1,200 calories of potato chips or 875 calories of soda but just 250 calories of vegetables or 170 calories of fresh fruit". This Super-Size-Me economy leads to early death through obesity, diabetes and heart disease. This lifestyle non-choice has played a big role in the decline of life expectancy for women over the past 20 years in 313 counties in the United States, a problem exacerbated by poverty, with the proof played out in the fact that those in the top 20% of American incomes live, on average, at least 6.5 years longer than those in the lowest income group. So you see, privatizing both profits and losses of corporations is paid for in not only gold but also lives by society. It's become more than a crime to be poor - poverty is a death sentence and corporations, who we're told over and over are job creators, are in fact, executioners.

In a culture where Orwellian political vocabulary turns the idea of universal single-payer health care into "death panels" while advocating actually killing grandma and rationalizes disenfranchisement of "non-productive citizens", it should come as no surprise that Obama's faux-populist promise to veto any budget proposal that doesn't contain tax increases can be turned into a class war, when, in fact, the war has been hot for decades and it's pretty clear which side is winning. The reality is this war doesn't differentiate between innocent and guilty when choosing its victims though it does discriminate based on race just like capital punishment. Just imagine the cognitive dissonance involved in being both pro-life and pro-death. Murderous spectacles are put on to appease the mob with circenses as if the panem killing them weren't enough. Maybe this explains the indifference to executing possibly innocent men like Troy Davis in Georgia or the Tea Party cheering for the straight shooting style of killing kids, the mentally ill and the innocent among the 234 people Rick Perry has executed in Texas:



It's a death sentence to be poor, especially if you're among the 49.9 million Americans who lack health insurance, a number that soared by 13.3 million since 2000. The main driver in both the national and personal bankruptcy story is a health care system whose costs are spiraling out of control thanks to corporate greed in both the insurance and pharmaceutical industries. State enforced patent protection of the latter isn't only killing AIDS babies in Soweto while thanks to the former, the only evidence that really matters in determining treatment based on evidence-based medicine is what's in your wallet. Tea Partiers like to cheer on this corporate killing too (listen for it at 0:55):

Killing requires a large staff

Poverty is also the best recruiting tool ever invented by the ultimate killing machine, the armed forces, and thus provides the fodder to feed the military industrial complex. Again, corporations are there to innovate new ways of killing and can even fill the void with corporate mercenaries when volunteers run short. The stark contradiction between the money making mantra of murder and Christ's advice, "If you want to be perfect, go sell your possessions and give to the poor, and you will have treasure in heaven, then come follow me" lends a dark layer of irony to our present wars justified by condemning Islam as a death-glorifying cult. Even though we know innocent people will die when we're bombing, droning or whatever we call trying to kill brown people we've labeled terrorists in Pakistan, Yemen, Afghanistan or Libya, it's somehow different than when those terrorists kill innocent people when they blow themselves up on buses in London or trains in Madrid. We're Americans celebrating the illegal killing of the most-wanted criminal of our generation thanks to our culture of death or out of relief from a false belief they wouldn't be called to die as the perpetual war on terror would end with Osama bin Laden's death? USA! United States of Assassination! Woo hoo death to international rule of law!



What? Killing bin Laden didn't solve that war on terror problem? You mean, it's all related, people blowing themselves up at outdoor cafes, creating terrorists by raining death down on Tripoli, Kabul and Baghdad or being the only vote in the UN to support Israelis killing Palestinians, allowing illegal settlements on their land or even denying them statehood next month. Killing is killing, whether in the name of good, Zeus, protection, defense or Allah. Once you accept it as no more than collateral damage you think differently, become indifferent to death and probably think it's ok to torture while praying in a church that covers up for pedophiles. Another victory for Oceania over Eurasia or Eastasia won't alter the course in the perpetual war because there's money to be made for McDonnell Douglas, Boeing, BAE and IBM from death.

But if, as the Supreme Court and Mitt Romney say, corporations are people then shouldn't they get the death penalty for killing people? Even at a time when slavery was legal, America had the morality to realize corporate killing wasn't. The corporate death penalty could be applied in cases of "operating contrary to the public interest" or those that saw "a pattern of abuses" and result in their charters being revoked. Ah, those were the progressive days, the very time today's right-wingnuts would like to take us back to with its lack of child labor laws, clean water protection and such. Trials might go something like this if such a world still existed I suppose:



Yeah. We not only wage war and trample human rights for oil companies' drilling rights, we just make them pay a fine for destroying entire ecosystems and spraying chemicals with unknown long-term effects to clean up the surface for the cameras. We enable through our continued consumption and ignorance of corporate evasion of responsibility for less visible murder via contamination or explosions in places like Ecuador or Nigeria. Move on to do the same in the Arctic while other gas companies extracting using hydraulic fracturing which pollutes the very water table we rely on for life will make sure we don't figure out how their harming human life. Car companies? What better way to kill millions than by rigging the game to ensure we drive cars forever? Big tobacco serves as a role model for the Catholic Church on how to cover up scandals after killing millions more. Obfuscate, donate and litigate.

Wait. All this and no mention of Bhopal. Yeah, that's right, when 3,800 people are killed almost immediately when tonnes of toxic gas escape and today more than 100,000 people remain chronically ill from exposure, it's more of the same, obfuscate (corporate takeover of Union Carbide by Dow Chemical - it's not our fault!), donate (maybe a stadium for the Olympics!) and litigate. Rinse and repeat. How about Monsanto? Who could have foreseen that allowing a corporation to patent life would have, well, life-ending consequences, right? DeBeers, turning blood diamonds into love? The beverage industry from Coca-Cola to Red Bull and Budweiser, the fashion industry or even Hollywood for toxification, body image distortion and indoctrination? As long as there's an app for you iPhone to keep you connected who cares how many Apple kills to make them. What about the billions of people whose lives are threatened by the ecological disaster sure to come about as a result of the greed for profit written into the DNA of the corporate psychopaths we've created. Oh yeah, that's right, I made a no climate change promise. That would be controversial and might give someone the idea to protest, maybe even occupy Madrid's Plaza del Sol or decide to march to Brussels or, heaven forbid, occupy Wall Street in the heart of NYC if perhaps the corpocracy's killing of the middle class and slaughter of the poor weren't enough. Oh, some people have already done that, are heading there and doing that (see below for live stream when available), fighting our fight. If they need a suggestion for one demand mine is to bring back the corporate death penalty - capital punishment for corporations!

Watch live streaming video from globalrevolution at livestream.com

Further reading:
Occupy Wall Street 
March to Brussels
Austerity and Anarchy: Budget Cuts and Social Unrest in Europe 1919-2009
US Poverty figures
IMF inequality report
US Uncut / UK Uncut
Further Viewing:
Sugar: The Bitter Truth
Food Inc. (It might take an extra click)
Clip from Inside Job
Interview with Josh Fox - maker of Gasland

Lepre-conned

It's somehow fitting that the €600 million giant glass and steel new airport terminal in Dublin opened on the very day the army of technocrats sent by the IMF and EU arrived to take over Ireland. A white elephant to symbolize how quickly a Celtic Tiger can be transformed into one of the PIIGS. Floating in and out of the international news stream I keep seeing the financial world in terms of a dystopian fairy tale where the bad guys always come out winners while the public is left to pick up the tab and we never seem to learn the moral. The Big Bad Wolf outwitted the littlest of the pigs earlier this year which forced the rest to scurry to a house made of wood while the Greek straw hut went up in flames. This week saw Ireland give up its wooden shack offered by the nationalization of her banks' debt as the growing storm forced her to surrender independence to Mother Europa and her IMF advisers. In Europe it's two PIIGS down and three to go, Portugal, Spain and Italy, meanwhile much of the western world is also looking for a brick house to give us shelter from the storm.

Ireland's path to financial purgatory has been predictable. Greece's problems came from many sources, rapacious banks taking advantage of financial rubes, politicians on the take and of course the MSM's favourite scapegoat, the lazy, sponging, early-retiring, Greek workers. Ireland's problems stem from one source - greed. Both the banks and the public were caught up in a collective euphoria brought on by the belief that shiny new buildings and playthings meant perpetual growth and wealth for all. A pot o' gold at the end of every rainbow. Ireland became an economic success story between 1994 and 2007 as GDP growth regularly touched 10% a year with the boom ascribed to reasons as varied as the success of U2 to the legalization of contraceptive sales in 1979. More prosaically, economists generally credited the rise of the Celtic Tiger to a combination of EU development funds and low corporate taxes with a global shift to a knowledge-based economy for which the Irish education system was ready to provide the skilled workforce all at a time of strong global expansion. The sudden success soon turned to hubris; while the main proponents of unconstrained financial globalization may have been American, it was Irish (as well as other European) banks that really became too large relative to their economies, taking risks that paid off big in boom times but exploded in their faces when the rainbow faded. As long as new Starbucks were being opened on Dublin's Grafton Street, it didn't seem to worry anyone that it had become the fifth most expensive street in the world.

When the inevitable financial crash came a couple years ago, it was the Irish who unsurprisingly woke up with the biggest hangover as they had partied harder than everyone else. Seems even property prices have to follow the laws of gravity and unfortunately the country had staked its future on Newton being wrong. In a decade, housing prices quadrupled making for a painful drop. Compounding matters, like many governments around the world, the decision was made to save the banks at the expense of the country, by guaranteeing the Irish banks' debt for two years. An excuse could be made acting as they did in the midst of a crisis, but extending the guarantee to the end of the year in September was inexcusable. The government gambled that the credit market somehow hadn't noticed that the six debt-guaranteed banks (Anglo Irish Bank, Allied Irish Banks, Bank of Ireland, Irish Life and Permanent, Irish Nationwide and EBS) had been hemorrhaging billions of euros a month and lost the bet. If it were only the Irish with anything to lose, the EU and the world may have stood by and watched the stuck pig bleed herself to death, however, not only do foreign banks have a huge stake in Irish debt, the remaining PIIGS financing costs are also tethered to Ireland's woes.

And so it was that Irish sovereignty was traded for another shot at providing bankster security. Even though the government was fully funded until the middle of next year, bondholders of Irish banks realized their security window could close anytime after the new year and therefore began a vicious attack on Irish bonds, bidding up the spreads versus German rates, stoking fears in the credit market. The tragicomedy was scripted from the moment the EU bailout fund was created after the Greeks ceded their sovereignty earlier this year. Ireland following suit was a self-fulfilling prophecy - when was the last time that available credit wasn't used? Those squeals of protest that a bailout wasn't needed we heard from the Irish Prime Minister, or Taoiseach, Brian Cowen, were drowned out in the media by those who insisted it was needed in order to maintain confidence in the debt market. Somehow it passed as normal that a country can be forced to take a bailout to pay the debts of profligate banks. Ireland had to be convinced they needed help but families trying to feed their kids wouldn't need much arm twisting. Instead, welfare will be slashed, public health services will deteriorate, children, the disabled and the elderly will lose the already inadequate services that afford them some hope and dignity. But the €100 billion that is owed by the Irish to German banks and the €109 billion owed to British banks will be secured.

Instead of the banks borrowing money from the European Central Bank at one per cent interest to fund their operations, the Irish public will borrow it for them at perhaps five per cent. The banks and their corporatist enablers have done a masterful job, not of banking, but of keeping the public confused and therefore impotent to do anything. The possibility of senior bondholders actually sharing in some of the cost of the bailouts by taking a haircut isn't even mentioned, funny, seeing as default risk is priced into the cost of debt for the borrower. No, the lenders are allowed to keep any profits they got from taking too much risk but are exempt from taking any losses when they actually occur. Such a situation creates moral hazard where financial institutions seeking to increase profit simply turn up the risk knowing full well that if their bets go sour, governments will step in and save them. Private gains and socialized losses, but, only for the banks. Now that's capitalism!

More than two years into the financial crisis and were still uncovering the filth and rot at the core of the world's financial system. The Irish case may be magnified in scale relative to its population but those that caused their banking collapse have doppelgangers all over the world and none of them will ever feel an ounce of guilt for what they've done. The names and acronyms of destruction may change but it's those in the know, on the take or at the table who are able to feed at the trough of asset bubbles created and fed by the banks who the public will be paying to support for years, as much as €200 billion in Ireland alone with a population of 4.5 million (and shrinking again) - €44,444.44 a head! This mass delusion was enabled by a culture of greed and avarice which glorifies the rich regardless of their social cost. Most of those who gorged themselves walk the streets free, able to enjoy the fruits of their deception. Bernie Madoff was no worse than Seán Quinn who built a pyramid scheme of CFDs which allowed him to control 25% of Anglo-Irish Bank only to see it inevitably collapse when the stock price went south. ASIC, the Australian SEC, describes CFDs, or contracts for difference, as "much riskier than a flutter on the horses or a night at the casino" much like psychopaths who recognize no limits and ignore the damage they do to others; CFDs continue to be traded and psychopaths continue to walk the streets and run our most powerful and influential institutions.

Seán FitzPatrick, former chairman of Anglo-Irish, a man who hid hundreds of millions in loans to himself, oversaw the bank which established a precedent of reckless lending the other banks were forced to follow in order to keep pace so as not to lose market share and thus see their stock price plummet. Ah, the irony. No longer seeing themselves as bankers but risk seeking entrepreneurs, in their eagerness to woo property syndicates the banks became both the lenders of equity and providers of debt in the same deals, resulting in absurd loan to value exposure of up to 100%. Even once it was clear the game was up and the government had stepped in to save them, the banks continued to deceive everyone around them hoping to continue the party a little longer. A stream of false information has been fed to the very entity created to take the non-performing loans off the banks' hands, NAMA, meaning the extent of damage the banks have done may take years to figure out. The incestuous relationship between banksters and government is most blatant in the US but Ireland has its own government protected "Golden Circle" who will escape punishment as the details of their deception are impenetrable to the normal person and so will become fodder for legend and lore, circular transactions being better than fairy tales at putting the public to sleep.

So, once again, who cares? When Greece was taken over six month ago at least it made the cover of the newspapers. This time, unless you were paying attention, you might not have even noticed that Ireland is now being run by EU and IMF bureaucrats. Trouble is we should care, but can't seem to bother. Even if someone does dare to bother, here's what we supposedly know: Ireland is not Greece and Greece is not Ireland, Spain is not Greece and of course Portugal is not Greece, and obviously Spain is neither Ireland nor Portugal so it follows that Neither Spain nor Portugal is Ireland. Thanks, but that's exactly how much the financial ministers and their puppet master banksters want us to know, because we are all destined to become Greece and Ireland soon enough. After all the public has already forgotten how the Spanish opposition leader was calling on his country to follow Ireland a short three years ago or that today's Polish prime minister wanted his country to emulate the Irish model at the same time. Next on the list is Portugal. Again, meh, whatever, it's just Portugal. That's when things get interesting however, as next on the list will be Spain and that's when we learn that in addition to TBTF, Too Big To Fail, there is such a thing as TBTB, Too Big To Bail.

Unsurprisingly, the wolves are already circling, bond holders smelling fresh kill wasted no time in turning their attention to the next victim. Spain's sovereign bond spreads over German Bunds hit euro-era highs the day after markets were supposedly pacified by the Irish takeover. What a shock! Set to steepen Ireland's economic nosedive is the new round of austerity measures, a condition of the EU/IMF rescue package. Huh? But surely cutting €15 billion out of the economy should help, right? Nope. Just look at the negative market reaction, they noticed what the first round of austerity two years ago did to the country, when the Irish tightened their belt while the rest of the world opted for stimulus spending. Having already raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent last time, round two will see even deeper cuts, making one wonder just where economic growth needed to balance the books will ever come from. Just a taste of some of the demands to come from their new masters, as the IMF/EU have demonstrated in offering what they try to spin as advice, like cuts to health and the railway, in exchange for life sustaining installments of the Greek bailout.

It's easy enough to keep the public numb with an overload of information, caffeine, sugar and pornography for awhile, but will we all simply roll over and keep taking it? Chances are we will as the public has barely lifted a finger as governments on both sides of the Atlantic have bent over backward to make sure their banking buddies earn every penny on their wagers while the public has paid the price of their losses through bailouts paid for by doubling down on debt and 'austerity measures'. A debtcropper society is being created as the biggest transfer of wealth ever seen from the bottom up occurs while, like sheep to the slaughter, most continue to march in step to their banking masters. Political opportunists try to convince us that we should blame the euro or even the poor for the financial meltdown when it's clearly a corrupted system of risk and reward that is at fault. Our financial fairy tale has turned into a horror movie where a zombie population is manipulated into supporting zombie banks operating thanks to zombie governments of zombie nations. So should we take to the streets in protest? Write an angry letter to the editor? Write another blog post or better yet, start a Facebook protest page? Sit around waiting for a real life Tyler Durden? No, the only thing these people understand is money and the power it gives them, so the only way to limit their power is to take away their weapon, cash. December 7th I'll be in line to take my money out of the bank, hopefully joining thousands around Europe and maybe the world taking part in Pearl Harbor commemorations that will try to sink the banks instead of the Pacific fleet. Sparked by an interview given by former Manchester United footballer Eric Cantona, Bankrun2010 hopes to dent the money creation power of the world's most corrupt. The more who join in, the more likely they'll at least hear our voice. After all, thanks to the US Supreme Court, money is speech.

Do-Over!

Isn't life great when you've got the do-over? No matter what goes wrong, what mistake you make, how bad you lose the game, you can always just take a mulligan and tee off again. Unfortunately life doesn't work like that for most of us, but for the Treaty of Lisbon and the EU that's exactly what they did and they took full advantage, knocking they're second drive from the tee right down the middle of the fairway. Isn't it comforting to know that the EU has chosen to go the Zimbabwe route of dealing with election results they don't like.

What a difference 16 months makes. It took that long for the Irish to completely change their minds about the Treaty of Lisbon, a treaty designed to further integrate Europe. Then, 46.6% of Irish voted "Yes" and 53.4% "No"; Saturday, 67.1% of Irish voters approved it, while 32.9% voted "No" - that's more than 2 to 1 in favour. Just look at the swing in those numbers in only 16 months. That's more than just a few people who changed their minds on something a little more important than switching from Coke to Pepsi. Hmmm, I wonder what it could be that made so many voters flip-flop? Was it the fear that they would give away more of their national identities, ceding ever greater control to a more integrated Europe? Or lose the ability to set their own taxes, along with their antiabortion laws and the ability to remain militarily neutral while still retaining their seat on the European Commission? Well, Ireland was given "guarantees" that the treaty wouldn't affect any of these areas, but none have actually been attached to the treaty - just ask Angela Merkel if she thinks the EU will have a standing army. No, the fact is, in today's Ireland, these are all minor worries. The reason the 'Yes' side of the campaign were able to recruit the help of prominent businesses like Intel and Ryanair as well as celebrities such as U2 guitarist The Edge and the poet Seamus Heaney to their side is good old fashioned money.

Probably no country has benefited more economically from the EU than Ireland. Over the quarter of a century since Ireland joined what was then the European Community in 1973 they have witnessed an economic boom that has seen peat bogs and grazing pastures give way to gleaming semiconductor plants and suburbs full of McMansions. While much of the world still holds onto the image of rural Ireland, much of the population has traded in their Guinness pints for Starbucks paper cups (27 stores in Dublin alone!) and stories of the potato famine for talk of real estate prices. Oh, but how quickly things can change. One mighty world economic crisis and the economic miracle of the Celtic Tiger turned into a meltdown.

To be fair, Ireland did achieve financial success in a remarkably short time. In retrospect, it is easy to point out the policy errors that positioned her economy for a precipitous fall, but who wants to be the doomsayer in the middle of a party? Ireland slashed spending in areas such as health expenditures, education, agricultural spending, roads and housing, and the military, while abolishing agencies such as the National Social Services Board, the Health Education Bureau, and regional development organizations. By 1993, government non-interest spending declined to 41 percent of GNP, down from a high of 55 percent of GNP in 1985. Subsequently, it significantly lowered corporate tax rates to 12.5 percent, at a time when the lowest corporate rates in Europe were 30 percent and U.S. rates stood at 35 percent. Since 2004, Ireland also has offered a 20 percent tax credit on research and development. In short, as Paul Krugman put it, Ireland became "just like us (the US), only more so." At the height of the boom in 2006, Ireland was building more homes per head than anywhere else in the world. Why not? Over 10 years, property prices increased five-fold. The Heritage Foundation declared Ireland the third freest economy in the world, behind only Hong Kong and Singapore.

Of course, we all know how this story ends. An economy that had become so dependent on construction and banking was doomed to fall. At the time of the first vote, a soft landing at worst was still envisioned, but the bottom fell out. It is thought that the Irish economy will suffer the biggest contraction in the industrialized world since the Great Depression, "something in the order of about 12 or 15 percent". Much like the rest of the world, the Irish government found itself having to take responsibility for the mistakes of private bankers. Ireland again needed the EU as she offered government guarantees on bank liabilities that put tax payers on the hook for potential losses of more than twice the countries GDP, a figure that would be equivalent to $30 trillion for the United States. "Without the steadfast support of the European Central Bank, our financial system would have collapsed," said the finance minister, Brian Lenihan. Without the EU, Ireland would've became another Iceland as they are living well beyond their means, borrowing almost €400 million a week. The Irish voter quickly became repentant, and the 'Yes' vote was a transparent, "sorry sir, we'll fall back into line".

But what is this Treaty of Lisbon really? No one seems to know. MSM articles quickly gloss over it by saying it is aimed at "streamlining decision-making in the 27-nation bloc". Once France and the Netherlands shot down the EU constitution in spring of 2005, EU lawyers went right to work figuring out how to get around those pesky voters. Instead of replacing all earlier EU treaties constitution style, the Lisbon Treaty simply amends the Treaty on the European Union (Maastricht) and the Treaty Establishing the European Community (Rome). Additionally they dropped all references to EU symbols such as the flag, the anthem and the motto, even though in practice these things will continue to exist. Quirky laws allowed every other nation besides Ireland (whose supreme court ruled all major amendments to EU treaties needed referendums in 1987) to simply pass it with a simple parliamentary vote - yes the Irish got to vote twice, everyone else not at all. The Lisbon Treaty is simply a constitution in disguise. Was the treaty necessary to advance the European agenda? Yes. Without out it there would be no hope for growth beyond Croatia and Iceland. It will also make dealing with trans-national issues such as global warming and fixing the banking system far easier. Should we be as leery as many conservative conspiracy theorist loonies in the UK? Maybe. It's hard not to notice that the treaty's biggest external manifestation will be the creation of two new posts, an EU president (which horror of horrors will be the result of back room dealing, without any formal vote and is expected to go to Tony Blair) as well as a High Representative of Foreign Affairs. And of course something called the External Action Service for the EU, with embassies around the world. Hmm, sounds a bit like the makings of a body with real supranational powers.

Perhaps the real answer lies somewhere in between, however it still may be a moot point in the end. See, Poland and the Czech Republic have yet to ratify the treaty which needs the support of all 27 member states. While Poland's acceptance is a mere Lech Kaczynski signature away having already been passed by the Sejm, the Czechs may drag their feet a little longer. President Vaclav Klaus, a confirmed Eurosceptic has stated that he will not sign the treaty until his country's constitutional court pronounces on its validity. He loves that he's controlling the destiny of 500 million people. Making things more interesting is the situation in the UK where an election must be called by next May at the latest and David Cameron's Conservatives are well ahead in the polls, 17 points by last count. Cameron's party has promised to hold a referendum if elected and the treaty has not already been put into force and has therefore written a letter to the Czech president basically asking him to drag his feet for a few more months. Aaaah, isn't life great knowing we can just relax as our future's are being decided through backroom deals?

The Race to the Bottom

"There's a rumor going around that states cannot go bankrupt. This rumor is not true."
- Angela Merkel speaking at a private bank event last month in Frankfurt

We've got a strong field, one where I feel anybody could - but nobody wants to - win it. Iceland almost showed everybody how it's done a few month back, now the other competitors seem to be jockeying for position to see which country will be next to go. While many fingers are being pointed at the US for causing much of the current financial pain, one need only look at the strength of the dollar to see that most investors at least are betting it won't be the US winning the race to national bankruptcy. Based on currency values, again the Euro nations must be in a good position, right? Not so fast, Italy and Ireland are both looking like prime candidates to cause the collapse of the grand experiment. Looking further east however, at those EU members who aren't yet part of the monetary union, we see a few more likely victims. The falling value of the zloty, forint, leu and koruna seem to be trumpeting the possibility that it will be Poland, Hungary, Romania or the Czech Republic to be first to the finishing line in a race nobody wants to win. The Baltic states are making a stronger case that it may be one of them. Even wackier, how's this for a dark horse - Austria.

While the US continues to look for new ways to throw money into a dark pit by giving away money to banks and car companies, the value of their dollar seems to be living in an alternate universe as it climbs against most of the world. Arguments for this occurring centre around the fact that in times of crisis investors move their capital to traditional 'safe' bets; here the dollar reigns supreme. But what about that ballooning debt? Well, not to worry, the government is sinking trillions of dollars into the banking industries et al to ensure a growing economy, so the numbers will come down eventually, right? Wrong. Without discussing the complete waste of money that are the bailout and stimulus packages, (ie. throwing good money after bad, not investing in the future - school and green technology anyone?) even if there hadn't been an economic meltdown, the US economy was already well on the road to disaster. Simple math, income statement stuff - aging population with the baby-boomers on the verge of retirement (that's right 2009 means those born in 1946 turn 63!) equals lowered income from taxes plus higher medical and social security expenses spelling disaster. Even the days of dollar hegemony in world trade (read: oil), bond auctions and other nations foreign reserves seem numbered. From Kish in Iran to Beijing's planned experiment to make the yuan the new dollar in the east, their are ominous signs that the world has finally tired of financing the US debt. I've argued on more than one occasion that the dollar's days are numbered and there are others who do it better than I.

But I digress, if the US dollar is going up, there must be a lot worse currencies to be holding onto. Unfortunately, I find myself holding onto a lot of Polish zloty as I'm living here in Poland and I can attest to the fact that I'm a lot poorer today vis-a-vis the US and Western Europe than 6 months ago. The situation is similar in the other newer EU states. Faced with the double whammy of falling economic activity and even faster falling currencies, many of these nations are facing bankruptcy. Not only are the prices of imports going up, financing prices are skyrocketing for both individuals and governments. Consumers who were suckered by banks into taking low interest Swiss franc loans are now paying much higher payments and governments are being forced to pay higher rates to issue sovereign debt. Standard and Poor's seems to be dividing the Eastern European countries into 2 groups: the first includes The Czech Republic, Poland, and Slovakia who are likely to fare better in the current crisis because of their more resilient private demand and greater fiscal flexibility, while in the second group are the three Baltic countries, Bulgaria, Hungary and Romania, all of which are highly vulnerable. In fact, S&P downgraded Latvia's debt to junk status last week and threatened the same action for the other Baltic states following the fall of the the Latvian government.

While these countries don't have a printing press as powerful as the US Federal Reserve, they do have the EU to play white knight. However, even here there are big cracks appearing in the foundations. When word leaked that Germany was mulling some bailout options for their eastern neighbours this drew a sharp warning from the ECB as such a move would be against the EU treaty's “no bail-out” clause which prevents members of the eurozone from supporting other members that are facing rising public debt. Members of the euro currency club are feeling the pinch as well. Thanks to monetary union, you can no longer bet on individual nation's exchange rates. But thanks to credit default swaps, you can place convenient bets on the break-up of the eurozone. Last week, speculators bet on an Irish default, these bets make it more expensive for Ireland to refinance its debt, thus threatening to turn into a self-fulfilling prophecy. The cost of insuring Irish debt hit 350 basis points 2 weeks ago, meaning that for every £100 of debt it would cost £3.50 to insure against default; a year ago it would have cost 10p. Ireland isn't alone in the Union with messy finances, Italy, Greece, Spain and Portugal don't look much better as spreads on government bond issues are soaring as credit ratings are lowered. Italy's public debt is the third largest in the world, 104% of GDP, what the Economist calls the 'ogre in the attic'. Welfare minister Maurizio Sacconi said back in December, "There is something worse than recession, and that’s state bankruptcy: an improbable, but nevertheless possible, hypothesis." Meanwhile, the crisis in the east could reinforce the problems in the west as their banks hold $1.74 trillion in former Soviet-bloc nations' debt. Austrian banks are the most exposed, with eastern European loans totalling 75 per cent of gross domestic product. Over half of Austrian bank Raffeisen's debt portfolio is based in the east.

The world is facing an economic crisis of unknown proportions and thus far the financial gurus have been trying to put a band-aid on the flow of red ink by administering the same cure that got us into this problem, issuing more debt. I haven't even considered the problems facing nations outside the US and EU; the Ukraine looks even worse, Ecuador and the Seychelles have already defaulted. The question is who's going to suck up all the new debt? With the US looking to secure $2 trillion and other developed nations about a $1 trillion in new debt, the problem becomes who is there left to finance it? Hillary Clinton went to China to beg them to keep buying treasuries while others are looking to the IMF and World Bank. Eurozone countries are getting into a bad habit of failing to meet bond auction targets. The IMF has already extended over $50 billion in emergency credit to Hungary, Ukraine, Iceland, Pakistan and Hungary. With other nations lining up they are desperately trying to raise more funds, world leaders are calling for a doubling in IMF resources to $500 billion. According to ING Wholesale Banking, emerging-market governments and corporations need to repay some $6.8 trillion of debt this year. In an effort to stop the free fall of Eastern European currencies the central banks issued joint statements to the effect of 'hey, the market doesn't reflect economic fundamentals, besides, we'll join the Eurozone soon'! Sometimes you have to know when you can't help everyone, a tipping point can be reached where the attempt to save one more costs the lives of everyone. That's why lifeboats have a maximum capacity posted - though I'd imagine it would have to be one helluva tough bastard who'd be able to watch someone drown while the rest watched in silence. There can no longer be any doubt that the world is faced with the prospect of financial Armageddon and it's time to decide who to let on to the escape pods. I know, I know, it's human nature to save a drowning person, but trying to save everyone is financial suicide.