Sindo 21.8.11 Debt Forgiveness - Main Stream Media Campaign

Well it seems this weeks theme is debt forgiveness even Marc “the best is yet to come” Coleman in in on the act. Together with a suggestion that the only way to stop a second global financial crisis is to prevent property prices from falling!! … 53846.html … 53786.html

What a clown.

If “those that bought during the boom are victims not fools” then those ‘economists’ that cheerled the bubble and dismissed any word of caution are the perpetrators. That’s you Marc.

I will back mortgage forgiveness 100% if any of these “leading economists” answers these three simple questions in the affirmative:

  1. will the growth in consumer confidence caused by mortgage forgiveness for the few outweigh the depressant effect of higher taxes on everybody else?
  2. is there any economist or economic theory anywhere in the world (no matter how whacky) that suggests that taking money away from those with good investment/financial management records and giving it to those with poor investment/financial managment records is a good thing for the eonomy long term?
  3. are depressed homeowners going to increase spending in the domestic economy more efficiently than other groups e.g. young renters (who may tend to spend more on nights out, boozeand food etc)? I.e. What are the relative multipliers for each respective group?

That constantin gurdgiev and brian lucey support these ideas seriously damages their credibility (although in fairness to Brian Lucey he is not an economist so is not expected to know these things).

That Morgan Kelly rolls in behind it is IMO the worst of all. None of these economists have provided any hard data, theory or even a broad model of how this would work. It is just a throw away comment that is repeated ad nauseum.

Surely one of them could step up to the plate and try to back up their mere assertions if there was any substance to it, but there clearly is not.

In answer to my questions above, my own views are:

  1. people who have already been burned by overspending on property are unlikely to increase their spending if given mortgage forgiveness, but people who have not are likely to dramatically decrease their spending if taxes increase. The net effect would therefore be negative on consumer sentiment and aggregate demand;
  2. there may well be, but much like the theories that undermined the FIRE economy, they are perhaps best consigned to the rubbish heap;
  3. in my view they are not. They have a history of spending money poorly on things such as houses, flash cars etc and investing in houses (again) and bank shares which are not particularly beneficial so if they do spend it will be on the wrong things. On the other hand, as set out above it is my firm belief that people who have spend the last few years under the yolk of heavy mortgage debts have become very conservative about their spending. They will not increase their spending due to the reduction in their mortgages, at least not to the same level as other groups would.



You’re living in the past Coles2. It’s all about the future. Hoverboards and everlasting gobstoppers.

Its very simple; if you think there is even a modest likelihood of you running for either a Dail or University Seanad seat in the next 10 years, make vague noises of some kind now about debt forgiveness. I seem to recall McWilliams had a dose of this disease in the run up to the last election. By the time the cost of it has become clear, you can say “well that wasn’t actually what I had in mind.”.

Its a regrettable side effect of democracy. Only disappointing in Morgan Kelly’s case. Has anyone seen the actual text of his remarks on the subject last week ?

BTW, I don’t think Wilbur Ross is really the debt forgiveness kind of guy.

+1 JS

I read a book called ‘Future Babble’ over the holidays and kept thinking of Marc Coleman. It’s about expert predictions, how they are so often no better than chance, and why we continue to seek these exprts out despite their record. (Some interesting stuff on how like-minded groups tend to be selective about their chosen experts’ records. There’s a whole section on Peter Schiff - often hailed here - whose overall record is pretty bad despite calling the crash in the face of mainstream concensus. But that’s for another thread!)

Anyway…in Future Babble, the author divides experts into two types of thinkers: hedgehogs and foxes. The former has a strong view with great certainty, shouts it very loudly and is incapable of admitting mistakes when they turn out to be wrong. The latter group is a more nuanced expert, less certain, more open to alternative views, and willing to adjust when the facts change. Alas, it is hedgehogs who get on TV, radio and into some Sunday papers because they offer what we want: unwavering certainty about the future.

Coleman is all of these things. His original pre-crash predictions were certain and voiced forcefully. He was wrong, but all experts (am I being charitable by calling him an ‘expert’?) make bad calls. The real tell-tale sign is that he can’t admit mistakes. I remember seeing him take exception to Pat Kenny saying the title of his book - The Best is Yet to Come - was woefullly ill-timed. Coleman attempted to wriggle his way out of it, saying “what I meant was…” things would get better eventually. To paraphrase: “Oh did you think I meant things were set to improve? That we were on a steady upward incline and that the doomsayers are all wrong? N-n-no. I meant there’ll be ups and downs but the overall trend is brilliant. Just you wait…”. That’s another classic hedgehog trait: when you predict oil will hit $300 a barrel or the Dow will hit 36,000 in the early 21st century and these things don’t happen. Fear not. Simply say “Just you wait…it’ll still happen, just a little later than I originally forecast.”

Finally, the book noted how bad predictions had almost no impact on the bankability of expert pundits. Experts who missed the sub-prime bubble and all that followed are still the stars of US infotainment business shows. And Marc Coleman still has his own radio show and a column in the best-selling (sigh) Sunday newspaper in the country.

It doesn’t matter what you say. Just say it very loudly, be more extreme than the last guy, highlight your hits, erase the hits and keep on spouting.

How old are you ?

One thing that makes the Tea Party so intriguing is that in America, things like austerity, not increasing taxes for the middle class and not piling on the debt are actually vote winners, or at least gain sufficient traction to be viable alternatives to spend spend spend policies.

I wonder though, what would happen if someone tried to set up a viable campaign in Ireland to say to people “Look, mortgage forgiveness for them means property taxes for you. If it costs €5-6bn to bailout the overindebted, then each household will have to pay a once off property tax of €2,500-3,000. This can be for all households, or we can exclude those on welfare and low incomes and everyone will then pay €5,000-€6,000 in a once off payment. If it is to exclude those who are to be bailed out, it is closer to €10,000 per household. Now, people of X constituency, do you want mortgage forgiveness and a once off tax, or do you want no mortgage forgiveness. It’s your choice.”

Figures are back of the envelope based on c. 2m households, half would probably be included in “too poor to pay” (it is ireland, after all) and up to half again of those remaining would want part of the bailout.

How is that in any way relevant?

If I’m older than you I’m past it and don’t understand the new reality. If I’m younger than you I don’t have enough experience of the world. Is that it?

Or are you trying to suggest that I am partial? Re the young renters comment, it goes back to my analogy of how stupid this whole bailout-homeowners-to-increase-consumer-demand theory is. It simply doesn’t hold water. If you really want to increase domestic consumption by giving money to people, you should analyise who spends the most in the domestic economy. The answer is people who buy a lot of Irish beer, whiskey, beef, potatoes (Irish, not new potatoes) and turnip i.e. students, the feckless youth and homeless alcoholics. Middleclass people with dependants and responsibility are less likely to go on a spending spree, so the argument simply doesn’t hold water. I’m not for a minute suggesting that the government ACTUALLY subsidise feckless spending.


I’m all in favour of a future (of some sort), but with the proviso that it’s a meritocracy where people live with their decisions and those that caused the problem aren’t given the opportunity to mislead people again. Until then I’m happy to ‘live in the now’ of blind rage and bitterness.

Anglo Dukes pontificating from on high about this on RTE Radio1 now.

Anglo Dukes stating “the real nonsense started here with 100% mortgages”…

Really Anglo???


Why are you concerned about debt forgivness when the Irish State has thrown billions into dead banks and in the process condeming the Irish state to years of misery ?

Unfortunately, and it galls me to say it, Coleman is correct. Logically, there has to be some degree of debt writedown on mortgage debt for households.

At present, many people in employment cannot pay their mortgages, the banks are coming to some arrangement allowing longer duration payback, partial writedowns and other jiggery-pokery to prevent repossessions and firesales. With lenders unilaterally increasing interest rates, this will push more people into financial difficulty. This will result in further cuts in household spending and further shrinkage of the economy. The GNP is the figure to watch not the GDP, which will grow with more multinational activity.

With respect to the taxpayer picking up the bill? this is not necessarily the case. Fianna Fail and Green Government f**ked up with the undertaking to underwrite the bank debts. This was stupidity of the highest order and probably treasonous.

The banks got their funding from depositors, shareholders, by issuing bonds on the world market and from the central bank (which is a proxy for the ECB). The government may have had a moral obligation to protect the depositors, but that is where the taxpayers obligations ended. Under the false pretence that it was a liquidity issue, not a capitalisation issue, (ie lies from the stupid bankers who borrowed short and lent long - more traitors), the government introduced its guarantee of bondholders and the central bank, who should have been aware of the risks of lending into a bubble and still did so - stupid. There is little reason why the government should honour these obligations as these lenders were aware of the risks involved. They should devolve these obligations to the banks and let them sink or swim. There is no necessity for the taxpayer to pay for these mistakes.

There are three options left open to the government at present.

Continuing to try to pay off the bondholders so that we ‘look good’ to the international financial community. This will result in economic ruination. The reason for this is that true growth as reflected in GNP (not virtual growth as reflected by GDP) is static and will probably fall, and the ECB is sticking to its brief to keep inflation down. These are the only mechanisms allowing growth in money to reduce the debt burden. The only consolation here is that many other governments are in the same trap and if the world economy goes down, we all go down together.

The second is some sort of government sponsored debt forgiveness. This could be achieved in the present circumstance by partial default of bondholders and negotiating with the ECB to write down the borrowings of irish banks, the money which was generated by fractional reserve banking. This money didn’t exist at the time the ECB lent the money to the irish banks. It is in fact a money ‘future’. It was debt created to be payed back in future. It can therfore be down sized to reflect a more realistic future of slow growth and economic shrinkage.

The third option is that the government divest itself of the banks completely. The result of this? the banks will go to the wall. Their assets will be bought by some finance company, who will take over their mortgage books. They will weed out the good mortgages and offload the bad mortgages. These will be bought at a knockdown price by another company down the food chain who will reduce the mortgage obligations so that they can make a profit. Hopeless mortgages will be either written off or bankrupted, which ever is the cheaper. This will be socially disasterous.

Whatever happens “A heavy rain is a going to fall”.

The recent moves by Finland vis-a-vis Greece demonstrates that there is no such a thing as a free lunch. We have not been ‘bailed out’ by the EU, we have become indentured servants, who will have to suffer to pay back our ‘bailout’. The degree of this suffering is in our government’s hands.

Have a listen to Newstalk Gill Kirby and Gurdiev

How old are you? One can’t justify an economic policy on the basis that money was wasted elsewhere. If you’re going to disagree with js, address the argument, i.e. the economic benefits or otherwise of proactive debt forgiveness.

My understanding of mortgage forgiveness will involve individuals in distress being referred for a ‘write down’ and being allowed hold onto their home but with a reduced debt. Any write down will hit the banks balance sheets, soaking up recapitalising funds, reducing the ability or date to when banks can reloan, causing asset prices to fall further crystalising further losses and write downs, needing further recapitilastion thus increasing the national debt. The Banks ability to lend is essential for a healthy economy - a national debt write down by the ECB will be the only way the Irish economy can offered to write down mortgages

This will not happen without pay back…

So its a resounding call for a Vote for no change!

I can give you certainty, but the majority seem deaf to its song, change is the status quo.