Monday, May 9, 2011

Billionaires gather in Arizona to discuss how to give away their money

Thursday and Friday marked the first gathering of the members of the Giving Challenge—a philanthropic mission started by Bill Gates and Warren Buffett that calls for the world’s richest people to pledge to give away at least half of their wealth.

The cause has thus far had 69 individuals and couples signing up—61 of which were at the gathering held at the Miraval Resort in Tucson, Arizona. For many in attendance it was the first time they were meeting each other, including Buffett, who stated at dinner that even he only new about a dozen people in the room. The Berkshire Hathaway CEO made the rounds and spoke individually with every single person on hand, and he claims that when the whole event was over, he had over 40 new friends.

Also on hand was Melinda Gates, the co-chair of the Bill & Melinda Gates Foundation, who said she was very pleased with the way the event went and the openness of everyone in attendance to speak passionately about the causes that matter most to them.

The common thread among all of the members of the Giving Challenge is that they are concerned with the most effective ways to use their wealth to combat the biggest problems facing the world. They care about the causes of the others, and are open to working together to find where they can make the most of a difference. They are not there to simply throw their money around to random causes and collecting tax right-offs. Many business practices are necessary in this type of philanthropy.

While the organization doesn’t make the billionaires pool their fortunes together, many felt most passionate about similar causes—education, social services, helping Third-World countries and protecting the environment.

A Volcano of Lies


Barack Obama, who pledged to restore ethical honor to the White House after the Bush years, is now burying himself under an active volcano of lies, mostly but not exclusively concerning the assassination of Osama bin Laden.

There was scarcely a sentence in the President's Sunday night address, or in the subsequent briefing by John Brennan, his chief counter-terrorism coordinator, that has not been subsequently retracted by CIA director Leon Panetta or the White House press spokesman, Jay Carney, or by various documentary records.

• The White House photograph of Obama, Clinton and top security advisors supposedly watching real-time footage of the Navy Seals' onslaught on the Abbottabad compound, their killing of two men and a woman (excuse for the latter killing: the standard "caught in crossfire") and liquidation of OBL himself turns out to have been a phony. BO and friends could have been watching basketball replays. Panetta has admitted the real-time video link stopped working before the Seals got into the compound.

• Panetta also admits Osama bin Laden was not armed, and that he did not hide behind his young wife's skirt. He conceded that under military rules of engagement Osama should have been taken prisoner, but then added vaguely that he showed some unspecified form of resistance. He probably reached for his walking stick, since he has been ailing from kidney and liver problems. As any black or brown resident in, say, the purview of the Ramparts Division of the LAPD knows full well, reaching for a walking stick or even holding a cell phone can be a death warrant; multiply that likelihood by a factor of 100 if you are the world’s most wanted terrorist in front of a score of heavily armed and homicidal Navy SEALs, no doubt amped up on amphetamine.

An admitted fan of the herb, Osama may have been stoned as part of his pain management program since there was a marijuana patch outside in the allotment and, like any world star in retirement, Osama liked to smoke a lot of weed and made DVDs of important speeches which stacked up forlornly on the bookshelf next to the bottles of pills and the Koran, hoping to get picked up by Al Jazeera or HBO. How his lieutenants must have yearned for his summary martyrdom as they received his importunate bulletins that they derail a train during Obama’s State of the Union and other madcap schemes.

• The White House claims that issues of delicacy prohibit the release of photographs of Osama's bullet-riddled face and required that after an alleged match with a relative's DNA he be given a swift but formal sea burial in a weighted body bag dropped from the aircraft carrier Carl Vinson into the north Arabian Sea, presumably awaiting retrieval by salvagers with a fix on the Vinson's position at the time of burial.

Maybe the Navy Seal photographer forgot to take his lens cap off. Obama's claims of ethical sensitivity certainly ring hollow. He's battling the wimp factor, and "Lo! The head of Osama" would be a nifty prop. There was lengthy display back in Bush-time of the mutilated bodies of Saddam's sons Uday and Qusay, killed by US special forces in 2003, plus filming of Saddam's own execution by hanging.

Further back, when DNA matches were unknown, US special forces verified Che Guevara's execution by permitting many photographs immediately post-mortem. They also cut off Che's hands, for subsequent verification by the CIA. We're not talking Miss Manners here.

• The official "back story" released Sunday night by Obama is that US intelligence learned of the Abbottabad compound only last August and spent the following months watching the place, following Osama's trusted couriers and concluding that it was highly likely, though not certain, that Osama was there.

This is bunk. The three-storey house has been a well-known feature of Abbottabad. Shaukat Qadir, a well-connected Pakistan Army officer, reported to CounterPunch from Pakistan: "For the record, this house has been under ISI surveillance while it was under construction. It was first raided in 2003, and the ISI just missed capturing al-Libi (he was later captured by the ISI close to Mardan in K-P Province). It has been raided on numerous occasions since."

Shaukat tells me that contrary to a report in the New York Times by Carlotta Gall on May 5, neither of the two trusted couriers were among the dead in the compound.

Shaukat: “The house where Osama had sought refuge belonged to two brothers from Mardan (a Pashtun dominated region of K-P) who had numerous aliases; locally they were known as Arshad (or Bara—meaning elder) and Chota (younger) Pathan, who have been residents of that house for seven years past. The rub is; neither one has been identified among the dead. If Osama was followed to this house by constant tracking of his courier who, according to CIA reports, shouldn’t one, if not both brothers, should have been present, shouldn’t they? But they weren’t. Of the seven bodies left behind (a female, a child and five men of ages ranging from mid-twenties to mid-thirties), none have been identified as being either brother…. “ Inference: “Osama was sold out. The operation was the result of entrapment. An entrapment organized through one or more of his most trusted aides…”

In fact, specific knowledge by US intelligence of the compound and its likely possible prime denizen goes back to 2005.

This has been established by Israel Shamir, also writing for CounterPunch. Shamir compares certain passages in the WikiLeaks documents on Guantanamo against those recently published by the New York Times and the Guardian.

Shamir reports these newspapers were working from the WikiLeaks files supplied to them (price unknown) by WikiLeaks' former German employee, Daniel Domscheit-Berg, "who went AWOL after this appropriation". Shamir says Domscheit-Berg made a deal with the Guardian which subsequently made a co-publication arrangement with the New York Times. "Both papers published the cables after redacting them, or should we say 'censoring' - removing everything the secret services demanded [they] remove."

When Assange learned that the Guardian and the New York Times planned to publish the Guantanamo files, his WikiLeaks team also prepared the files and began to upload. So did the competitors, possessing the Domscheit-Berg appropriated copy.

The most important redactions by the Guardian and the New York Times, Shamir writes, "were directly dictated by the US intelligence services. The name of Nashwan Abd Al Razzaq Abd Al Baqi, or by another name, Abdul Hadi al-Iraqi or by his number IZ-10026 was edited away from the file of Abu al-Libi (US9LY-010017DP) and elsewhere."

This is significant because al-Iraqi was in close contact with al-Libi who had been designated by Osama in 2003 as his trusted, official courier, therefore aware of OBL's whereabouts at all times. In the end, at separate times, the US captured both al-Libi and al-Iraqi, had them both tortured and thus became aware of al-Libi's courier duties and hence the possibility that Osama was in Abbottabad.

Comparison of the redacted version of the Guardian and in the uncut version of WikiLeaks shows to what extent all the traces of al-Iraqi, the likely informer-under-torture, were removed at the behest of US intelligence. It was not connected to "caring about informers", for al-Libi was understood at the time to have committed suicide in a Libyan jail just before the arrival of the US Ambassador in Tripoli. The file of al-Iraqi is missing in all databases; he was captured in 2005 and kept in various secret prisons, until transferred to Guantanamo where he remains detained.

So the trail to Abbottabad was known to the US intelligence services at least since 2005, when al-Libi was captured. "Careful reading of the file," Shamir writes, "shows that al-Libi was connected with al-Iraqi since October 2002. In 2003, Osama stated al-Libi would be the official messenger between OBL and others in Pakistan. In mid-2003, al-Libi moved his family to Abbottabad, Pakistan and worked between Abbottabad and Peshawar. He maintained contact with al-Iraqi."

We can conclude, from this narrative, that when the unredacted WikiLeaks files surfaced, US intelligence concluded that Osama's associates would soon figure out that the Americans had made the appropriate connections and conjectures and there the associates urged him to move on with all due haste. So Obama decided to send in the Seals.

From this active volcano of lies, we can safely assume that Obama's re-election campaign has been well and truly launched. Lift-off began on April 27 with the White House's release of the long birth certificate. Obama seems to have problems with timely provision of convincing documentation about arrivals (his own) and departures (Bin Laden's).

Release of the full birth certificate could have come in 2008, when it first became a minor issue. Instead Obama refused to authorize release until last week, by which time 25 per cent of all Americans and 50 per cent of all Republicans thought he was hiding something fishy. A photo of the dead Osama would have been useful this week in quelling speculation.

Had it not been for cloud cover over Abbottabad, the raid on Osama's compound could have come on Friday, April 29, the same day as the royal wedding.

Saturday, April 30 was reserved for the attempted assassination of Colonel Gaddafi, with the dropping of precision-guided bombs on the house of his son Saif, who died along with three grandchildren. Saif, then four, was in the Gaddafi family compound on April 15, 1986 when bombs ordered up by Ronald Reagan were dropped from F-111s, killing his 15-month old sister, adopted by Gaddafi 11 months earlier. Thus have Reagan and Obama shared a target. 'Decapitation' - going for the enemy's top guy - is now standard Nato strategy. In the "shock and awe" assaults on Iraq in 2003, the prime mission of US bombers was to target whatever houses Saddam was presumed to be visiting. We can assume electronic eavesdrops or maybe a human observer told the Nato targeteers that Gaddafi himself was in the house that Saturday, and the bombers were swiftly dispatched from Nato's Allied Air Command in Izmir, Turkey, whose overall commander is Lt-Gen Ralph J. Jodice II (US).

Would Obama have been briefed on the plan, or have signed off on a program of targeted assassination of Gaddafi? It seems a sure thing.

Reverse the rationale. If a Libyan bomber had blown up the wedding couple and a goodly tranche of the British upper crust in Westminster Abbey under justification that the whole place and its human contents, down to the grandchildren, not to mention the hats, were fair game because Cameron was there.

As the Oxford historian Mark Almond subsequently wrote in this site, "Little wonder, the royal newlyweds' honeymoon was suddenly cancelled on Saturday. So much of William and Kate's nuptials was choreographed around their parents' and grandparents' weddings that it was a fair guess that like Princess Elizabeth and Philip they were going to fly to Malta to start their honeymoon before going on to Kenya where three generations of Windsors have enjoyed cementing their relations. Malta is too close to Libya for comfort and Kenya's Muslim minority might not be too friendly to a serving Nato officer."

But Gaddafi survived. So Obama only had one bloodied feather in his cap when he gave one of the most morally repellent speeches I have ever heard delivered from the White House. Bush at least had the crude brio of a semi-literate jock when he vaunted America's prowess. Obama's "we nailed him" paragraphs of mendacity concluded with Dickensian Heepishness: "Tonight we are once again reminded that America can do whatever we set our mind to. That is the story of our history."

Alas, the actual story of the "our history" is an unrelenting ability to lie about everything, while simultaneously claiming America's superior moral worth.

Footnote: Peering briefly at the royal nuptials in a house high up in the mountains above Malibu, I was surprised to see how spectacularly tacky the British upper classes have become. They looked very vulgar. The appalling cuteness of the Aston Martin supplied the coup de grace. The groom didn’t know how to stand up properly. Contrary to effusive comparisons, the bride’s much touted dress from the atelier of the wildly overpraised late Alexander McQueen, was a far cry from Grace Kelly’s, designed by Helen Rose, who had dressed her in High Society and The Swan. The bride’s headdress hung like a dishrag. The only vestments born with confidence and aplomb were those of the churchmen. The Archbishop of Canterbury, with his emphatic beard and specs, had a splendid cope. His voice was confident. I’d like to see him in debate with one of Teheran’s ayatollahs. But the Anglo actresses watching the event on our mountain were ecstatic. My daughter Daisy, returning to London two days later, reported that the young women she was encountering were all swept away by the event and eager for marriage.

De Valera’s American Parent

On Apr 24, 2011, at 1:19 PM, Danny Hallinan wrote:

Hello Alexander-

Many years later there were two things that made me think of writing you. Reading your Diary on the Easter Uprising, a point of familial info. Dev's mom wasn't American - his "Dad" - whatever - was. His mother is my - and Ringo's - great-great-grandmother's sister. A Cull from Ballingarry who returned a young widow from NY. This connection is part of how I have an Irish passport.

The other random thought is that it was exactly 50 years ago that we met in London. Aldermaston March 50th just a week or so ago, Yuri Gagarin 50 years, and Zill - a truly fine fellow.

Danny Barry (Shoot me like an Irish soldier) Hallinan

But that 1961 march wasn’t the first time I met the Hallinan boys from San Francisco – at least Terence (later the DA of San Francisco) and CounterPuncher Conn aka Ringo. It was on one of the earlier Aldermaston marches at the end of the 1950s, in the company of Konni Zilliacus’s daughter Linden, plus Saul Landau, who was traveling through Europe with C. Wright Mills.

When Prophecy Fails

From: Noel Ignatiev
Date: April 30, 2011 4:49:07 AM PDT

Dear Alex,

Re your Diary on cognitive dissonance and When Prophecy Fails Perhaps you know about the Miller-ites in the 1830s. William Miller prophesied the end of the world and even predicted the date, based on calculations he made from the Bible. He gathered thousands of followers in upstate New York (the "bruned-over district," the 19th-century equivalent of California today) to give away their property and join him on the hilltops waiting. When the event did not take place, Miller said he had miscalculated, and announced another date a few months off. Again thousands believed him and readied themselves. When the second date passed uneventfully, the movement dissolved, but not quite: the original Seventh Day Adventists were disappointed Miller-ites, and they in their turn spawned health cultists who eventually developed techniques for preserving cereal grains. Kellogg's in Battle Creek, Michigan was the result, starting out to save the world through nutrition, today just the manufacturer of Wheaties. T.C. Boyle tells some of the story in his novel The Road to Wellville, later made into a film. Characteristically American episode.

Best, Noel

Earthquakes in Kabul, Stasis in Iran

Our latest newsletter goes out this weekend, with brilliant reports from Patrick Cockburn from Kabul and Teheran. Patrick’s energy is boundless, notwithstanding the huge physical exertion imposed on him by an attack of polio in the mid-1950s – the last Irish epidemic before the Salk vaccine. But Patrick hauls himself from one war-torn location to the next, files his uniquely perceptive reports and finds times to co-write with his son, my nephew, Henry a searing account, Henry’s Demons, of the schizophrenia that Henry has endured and from which he has emerged across the past eight years. It’s a marvelous book, with Henry’s contributions of a particularly searing clarity. Next week we will run some excerpts on this site.

Noticed how Fukushima has dropped out of the headlines again? What to know what’s actually going on? In this latest newsletter John Wilcox in Tokyo supplies a full update on the fall-out, the resistance to nuclear power, the maneuvers of the nuclear industry.

What do pwogwessives pray for each night? Just one really genuine “humanitarian intervention” they can wholeheartedly support. There have been so many disappointments – in the former Yugoslavia, in Iraq – but surely Libya was a safe bet! Doesn’t seem that way now, as NATO settles into its prolonged agenda of the destruction of Libya, and more slimy deals being hatched in Benghazi see the light of day. In our newsletter Jean Bricmont dissects the myths and illusion of “left” humantervention.

Subscribe now!

And once you have discharged this enjoyable mandate, I also urge you strongly to click over to our Books page, most particularly for our latest release, Jason Hribal’s truly extraordinary Fear of the Animal Planet – introduced by Jeffrey St. Clair and already hailed by Peter Linebaugh, Ingrid Newkirk (president and co-founder of PETA), and Susan Davis, the historian of Sea World, who writes that “Jason Hribal stacks up the evidence, and the conclusions are inescapable. Zoos, circuses and theme parks are the strategic hamlets of Americans’ long war against nature itself.”

"Shock Doctrine" economics ruining America

WARNING: Reading Naomi Klein's "Shock Doctrine: The Rise of Disaster Capitalism" will disturb your sleep and haunt your waking hours. If you're a real American, it will make you want to scream — and do something to put "the bad guys" in their place. Everyone — especially Milton-Friedman, free-market lovers like Kingsley Guy — should read "Shock." If enough people do so, it could save the country. If they don't, our democratic/representative government and capitalism will be permanently replaced by the un-American, corporate-socialist state that has already taken hold — and it will be our own fault.

For 50 years, laissez-faire economist Friedman and his apostles at the University of Chicago have spread a doctrine based upon "the elimination of the public sphere, total liberation for corporations and skeletal social spending," according to Klein. Even worse is how they do it: For Friedman and his minions, widespread disasters (natural and man-made) are opportunities to make money. While victims are really or figuratively bleeding, too shocked to realize what's happening, in cahoots with lapdog governments, they impose "deregulation, privatization, and cutbacks" on economies as the formula for recovery. Promising prosperity for all, they deliver widespread poverty and oppression.

From Chile in 1973 to Sri Lanka after the 2005 tsunami, Russia after the Soviet Union collapse, South Africa after apartheid — in country after country, Klein "rips away the 'free-trade' and globalization ideologies that disguise a conspiracy to privatize war and disaster and grab public property for the rich few," says Chalmers Johnson.

Klein will help you see how "shock doctrine" has disfigured the U.S. — from the privatization of public schools in New Orleans after Katrina to corporate takeovers today in Wisconsin, Michigan, Indiana, Florida, across the nation. You'll understand the aftermath of the recent mortgage crisis as a made-for-free-marketers, financial windfall. Since the 2010 mid-term elections, when tea party/Republicans gained control of governships and legislatures, Friedmanites have been following the same script: using "the shock" of our current economic recession permanently to replace government with for-profit businesses. It explains why Gov. Scott Walker's budget was really about union-busting and privatization, even after workers made the economic concessions he demanded. The GOP/Paul Ryan "Path to Prosperity," that kills Medicare, Medicaid, and Social Security, uses "shock doctrine" to remake America as a corporate state.

Klein speaks truth to power and empowers people with truth. Of course, some people will refuse to read "Shock Doctrine" and even some who do will deny its proofs. Too many people have believed too gullibly in free-market ideology to be convinced they have been ripped off by immoral, greedy schemers. The Wisconsin uprising against Republicans proves "shock doctrine" can fail. But will it be the exception or the rule — and will Americans wake up soon enough from the shock of being shocked?

Stephen L. Goldstein duels the issues with Kingsley Guy on alternate Fridays. E-mail him at

Flashback 2006: Obama On Raising The Debt Ceiling

In 2006, Senator Obama argued and voted against raising the debt ceiling. In 2007 and 2008, he didn't even bother to vote.

In 2006:

Democrats in control of Congress, including then-Sen. Obama (Ill.), blasted President George W. Bush for failing to contain spending when he oversaw increased deficits and raised the debt ceiling.

"Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership.”

-- Senator Barack Obama in 2006

Obama later joined all Dems in voting en bloc against raising the debt increase.

In 2010:

Behind closed doors and with no cameras present, President Obama signed into law Friday afternoon the bill raising the public debt limit from $12.394 trillion to $14.294 trillion.

The current national debt is $12.3 trillion. Check out the National Debt Clock, which tells you your share of that -- roughly $40,000 per citizen, $113,000 per taxpayer.

The bill also establishes a statutory Pay-As-You-Go procedure requiring that new non-emergency legislation affecting tax revenue or mandatory spending not increase the Federal deficit – in other words, that any new spending or tax cuts be paid for with new taxes or spending cuts.


WH: Obama regrets vote against raising debt limit

WASHINGTON – The White House said Monday that President Barack Obama regrets his vote as a senator in 2006 against raising the debt limit — the same kind of increase he's now pressuring Congress to approve.

Obama "thinks it was a mistake," presidential spokesman Jay Carney told reporters. "He realizes now that raising the debt ceiling is so important to the health of this economy and the global economy that it is not a vote that, even when you are protesting an administration's policies, you can play around with."

The country will reach its debt limit of $14.3 trillion by May 16. If Congress doesn't raise it by then or shortly thereafter, the government would not be able to make debt payments, leading to an unprecedented default of the national debt and driving up borrowing costs for the government, U.S. companies and consumers, the Treasury Department warns.

Web of terror an economic stranglehold

Osama bin Laden is the face of terrorism to Americans, but we ignore terror's economic roots and branches at our peril. They won't wither away because of bin Laden's demise.

This is not to reduce every force of history to mere human action in the market. Bin Laden may have hoped to bankrupt the United States by causing it to overreact to the 9/11 attacks, as The Washington Post's Ezra Klein has written. But he saw himself as a holy warrior, as well as a rebel against his wealthy Saudi family's business empire.

His key grudge, however, leads back to economics. U.S. troops were and remain in the Middle East primarily to protect the free flow of the largest oil reserves in the world. To help ensure cheap oil, America has closely allied itself with repressive regimes, particularly in Saudi Arabia.

During the decade of the so-called War on Terror, the United States has done nothing to wean itself off imported oil or extreme car dependency. In 2006, President George W. Bush acknowledged this issue, saying, "Problem is, we get oil from some parts of the world and they simply don't like us."

Nor has much progress been made in addressing the dire poverty, lack of opportunity and armies of unemployed young men that help fuel resentment against America and the West; these men become potent recruitment tools for terror groups. An Arab spring may or may not bring democracy to some of these nations, but the harsher and more dangerous reality remains operative for now.

(Speaking of terrorism, some 35,000 people have died in drug-related killings in Mexico during the four years of President Felipe Calderón's battle with the cartels. As with oil, a root cause is uncomfortable but true: American appetites.)

The failed states and dictatorships, and even large, barely governed chunks of other developing nations, are chaotically separated from the globalized economy that most Americans take for granted.

At the same time, globalization is both a conduit for terror and at grave risk from it. Terror groups amass and move money internationally; they cross borders and operate networks and subsidiaries like malign corporations. Authorities in the U.S. and elsewhere still struggle to cut off their funding sources.

The 9/11 attacks challenged globalization but didn't stop it. Increasing security, for example, added costs and delays to the maritime industry. The Port of Seattle spent $41.4 million on additional seaport security after the attacks, much of it from federal sources. But trade quickly rebounded.

That shouldn't make us complacent about the vulnerabilities of our 10,000-mile-supply chain or interconnected financial systems. The first round of modern economic globalization came crashing down with World War I. What happens if terrorists close the world's oil chokepoint at the Strait of Hormuz or detonate a bio-weapon on Wall Street or in the money centers of London or Shanghai?

Some economic modeling suggests it could cause much larger consequences, for example, in capital flight, market uncertainty and depression of investment, than the immediate physical damage of a terror strike. The damage would be magnified further in an America where millions are struggling to recover from the Great Recession.

The event of Sept. 11, 2001, smaller by comparison, pushed the United States into a recession (admittedly with help from the dot-com bust) and briefly shut down the financial markets. The airline, tourism and insurance industries were especially hard hit, with airlines taking years to recover.

To be sure, winners also emerged in defense, security and counterterrorism sectors. Over the decade, the Department of Homeland Security has spent nearly $425 billion (Amtrak gets about $1.5 billion a year). The Obama administration projects spending of $71.6 billion in 2012.

Much heavier costs have come from the wars in Afghanistan and Iraq, sparked directly and indirectly by 9/11. Nobel laureate economist Joseph Stiglitz has estimated the Iraq war alone will cost $3 trillion. The tab for Afghanistan has topped $400 billion with projections of $1 trillion or $2 trillion.

While security may be priceless, it's debatable whether much of this money, most of it borrowed and adding to global imbalances, has actually made America safer. Instead, bin Laden succeeded in making it appear to many people overseas that America was at war with Islam, a costly problem in itself.

Also, spending for war, especially, doesn't add to future productivity or competitiveness, such as spending on education, research and infrastructure. Nor is it sustainable with federal debt and deficits hitting levels not seen since World War II.

So Americans naturally celebrate a murderer of innocent civilians being run to ground. It might also be time to take stock of some of the economic and geopolitical choices we're making that help the would-be Osama bin Ladens of the world operate profitably.

You may reach Jon Talton at

The Terrorist Who Got Away...Strikes Again

Economist Morgan Kelly reveals in the Irish Times today that a deal last November to haircut approximately 30B Euro of Irish bank debt was sabotaged by financial terrorist Tim Geithner. The 20B Euro or so reduction in Irish bank debt entailed by the haircut would not, of course, have saved Ireland from sovereign default, but it would have been a symbolic victory and would have set a good precedent.

But Geithner and the ECB would have none of it. Kelly recounts a G-7 conference call in which Geithner struck down the deal to haircut bondholders. Remarkably, it was the IMF who originally proposed the (very modest) haircut in the first place, and argued against bailing out unguaranteed bondholders. The ongoing economic and political upheaval we are witnessing in Ireland is just one more example of what Hugh Hendry has called "The Economic Consequences of the Bailout."

Kelly's Irish Times op-ed is worth reading in its entirety. He makes a strong case for Ireland getting out of the bailout altogether. In fact, he argues what we have been saying all along: Ireland has no choice about whether to default -- it can default now on the bank guarantee, or it can default on its sovereign debt later on. The choice is clear. The only question is whether Ireland will be able to force her politicians to make the right one. (hat tip Yves Smith)


Source - Irish Times

Ireland's Future Depends On Breaking Free From Bailout

by Morgan Kelly

WITH the Irish Government on track to owe a quarter of a trillion euro by 2014, a prolonged and chaotic national bankruptcy is becoming inevitable. By the time the dust settles, Ireland’s last remaining asset, its reputation as a safe place from which to conduct business, will have been destroyed.

Ireland is facing economic ruin.

While most people would trace our ruin to to the bank guarantee of September 2008, the real error was in sticking with the guarantee long after it had become clear that the bank losses were insupportable. Brian Lenihan’s original decision to guarantee most of the bonds of Irish banks was a mistake, but a mistake so obvious and so ridiculous that it could easily have been reversed. The ideal time to have reversed the bank guarantee was a few months later when Patrick Honohan was appointed governor of the Central Bank and assumed de facto control of Irish economic policy.


Ireland’s Last Stand began less shambolically than you might expect. The IMF, which believes that lenders should pay for their stupidity before it has to reach into its pocket, presented the Irish with a plan to haircut €30 billion of unguaranteed bonds by two-thirds on average. Lenihan was overjoyed, according to a source who was there, telling the IMF team: “You are Ireland’s salvation.”

The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of US soft power, and in who our friends really are.

The negotiations went downhill from there. On one side was the European Central Bank, unabashedly representing Ireland’s creditors and insisting on full repayment of bank bonds. On the other was the IMF, arguing that Irish taxpayers would be doing well to balance their government’s books, let alone repay the losses of private banks. And the Irish? On the side of the ECB, naturally.

In the circumstances, the ECB walked away with everything it wanted. The IMF were scathing of the Irish performance, with one staffer describing the eagerness of some Irish negotiators to side with the ECB as displaying strong elements of Stockholm Syndrome.

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