Friday, November 5, 2010

Government's scorched earth policy is economic lunacy

In "The Valley of the Squinting Windows" written in 1918, its author satirically used a fictional village of Garradrimna to expose the parochialism of Irish life. Listening to RTE 1 this morning brought a small slice of a modern Garradrimna to life. But this time it’s not a fictional village it’s the voice from the bunker in Merrion Street as this Government ekes out its final days.

Tuning into Morning Ireland was like eavesdropping a conversation of a Garradrimnan bar stool regular. Agricultural Minister Brendan Smith blamed the international global marketplace for our woes. Has anyone told him the collapse in our domestic economy was caused by us alone? Does he not realise that it’s physically impossible to export houses and buildings?

Smith then unveiled his grand contribution to the austerity battle plan. An EU fund would be tapped to buy Irish cheese to be handed out for free to needy citizens. The single most important Government contribution to improving the welfare of citizens this week of all weeks was a headline announcement of free cheese. Free cheese parcels should be mentioned quietly by low level civil servants and not announced by senior Government Minister anxious to generate some favourable publicity. Marie Antoinette on hearing of Parisian bread riots may have asked the naive question why don’t they eat cake? Brendan Smith’s take on this is we should eat cheese.

But maybe Smith has invented agrarian quantitive easing? Getting the EU to buy up Irish cheese would prime the economy with fresh money!

In 1945, facing the ovewhelming might of invading Allied armies closing in on all sides, propaganda from Berlin's Reichstag bunker promised at first wonder weapons and later still rescue by a mythical new army being assembled. When reality finally dawned, blaming everyone else for the destruction he and his cronies had caused, Hitler ordered the wholesale demolition of German industry and infrastructure. Only the intervention of his side kick Albert Speer who countermanded this lunatic order saved Germany from total ruin.

With the bond market closing in all sides, our bunker in Merrion Street unveiled its wonder weapon NAMA which was to get banks lending. It proved a monumental failure that led to an unmitigated economic planning disaster resulting in what will probably become a €65bn tax payer banking bailout bill. Since unleashing NAMA, two rogue banks have been mothballed, another is trying to jump from the fat to the fire, the big two are all but shut for new business, one foreign owned outfit has closed down both a business bank and retail bank, the others are being drip fed loan loss capital from their parents. The credit union sector, the only partially working bit left of the banking system, is too sickly and too small to matter.

The problem for Minister Lenihan is the two banking hulks, AIB and Bank of Ireland while hauled up on the sand bank at low tide are still holed beneath the water line. The tide is rising again as they make ready to unveil a fresh round of losses.

Yet another weapon the Farmleigh gathering was supposed to lead the mythical army of the Diaspora to the rescue. It was but more propaganda which dressed up the tiniest morsel of reasonable news in Bunker Speak to herald a winning Government strategy.

This week was both eerily prophetic and pathetic. First we had the announcement of what amounts to scorched earth, economic madness. Minister Lenihan is set to cut what little meat remains off the bones of an anorexic near zombified economy. Bled almost dry of fiscal fuel more is to be drained off. Echoing Charlie Haughey he told us we would have to live within our means.

And he unveiled yet another wonder weapon! The interest roll up deal on Anglo’s IOU’s would save spending more money, for now. We were also reminded of a positive trade balance as the multinational export sector is doing well. It is at generating profits, taxable at only 12% but it will hardly generate the jobs needed for economic recovery. And balance of trade matters little to those struggling with emaciated incomes.

There was more good news from the bunker – the live register was down! Things are still getting worse but more slowly it seems. And then the best wonder weapon of all was revealed. It was the stock Fianna Fail response to economic woes, that most traditional of all Irish export businesses – the business of exporting young people. Are we the only country on the planet that economically plans for emigration?

Well if Minister Lenihan is serious he could always front load emigration by paying people to go – a grant worth two years job seekers allowance would probably work.

The Bunker has spoken. Free cheese, emigration for an anorexic anaemic economy, and interest roll ups were the order of the day. We have to wait a few more weeks to hear of the rest of its battle plan while parochial politics plays out its end game in Donegal.

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