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Saturday, May 21, 2016

Economists have a century of failure behind them.

Over the past few weeks, David Cameron and George Osborne have been claiming, over and over again, that those of us who support Brexit have lost the economic argument. They want us to concede that we only really care about “sovereignty”, and to accept that this would come at a heavy cost in terms of forgone prosperity.
It’s a convenient narrative for the Remain side, and one which underpins its strategy to win the referendum. It’s also utter nonsense.

“Time and time again, the majority of economists make spectacularly wrong calls, and it is a small, despised minority that gets it right

Nobody on the sensible Brexit side should accept that quitting the EU would be bad for growth, jobs or wages. The free-market, cosmopolitan, pro-globalisation economic case for leaving is stronger than ever; and the people who would run the Tory party and thus the country in the event of a Brexit largely believe in it.
They are neither nativists nor protectionists. They are not wannabe Donald Trumps. The hysterical studies claiming that Brexit would ruin us are grotesque caricatures, attempts at portraying a post-Brexit Britain as a nation that suddenly decided to turn its back on free trade and foreigners.
As Roland Smith of the Adam Smith Institute has argued, leaving would be a journey, not a Big Bang. In the short-term, a Brexit would almost certainly mean the UK remaining in the European Economic Area (EEA), like Norway: we would be liberated from much political interference, be allowed to forge our own free-trade deals while retaining the single market’s Four Freedoms.

Europe’s shell-shocked corporate interests would demand economic and trade stability of its equally traumatised political classes, and they would get it.
Over the subsequent few years, we would undoubtedly negotiate a proper British model, leading a new (and growing) group of post-EU European nations; a sensible Tory government would seek to stick with as much of the EEA model as possible, while adopting the sorts of liberal, pro-growth but carefully controlled immigration policies pursued by Australia, America or Canada.

Together with supply-side reforms at home, the UK would become more, rather than less, attractive to global capital. The Treasury, OECD and IMF’s concocted Armageddon scenarios wouldn’t materialise.
Remain has only won the economic argument in the sense that most economists and the large institutions that employ them support their side. A recent pro-Remain letter organised by Tony Yates, an academic, collected 207 signatures; by contrast, the admirable Economists for Britain group is only 26-strong. But this merely proves that the truth is not determined by a popularity contest.
Time and time again, the majority of economists make spectacularly wrong calls, and it is a small, despised minority that gets it right.

In 1999, The Economist wrote to the UK’s leading academic practitioners of the dismal science to find out whether it would be in our national economic interest to join the euro by 2004. Of the 165 who replied, 65 per cent said that it would. Even more depressingly, 73 per cent of those who actually specialised in the economics of the EU and of monetary union thought we should join – the experts among the experts were the most wrong. Britain would have gone bust had we listened: we would have suffered an even greater asset bubble and financial collapse. We would have been like Ireland and Iceland, begging for handouts.

The vast majority of economists did not foresee or predict the financial crisis or the Great Recession or the eurozone crisis. Yet they now have the chutzpah to behave as if they should be treated like philosopher kings, an all-knowing “profession” that we are all supposed to bow down to uncritically. It’s dangerous, self-serving nonsense, like all such elitist fantasies.

Remember the Twenties? The economics profession overwhelmingly failed to see the great bubble and subsequent crash and depression. The Thirties? It messed up on just about everything. The Forties and Fifties? It bought into planning, industrial policy and nationalisation.

In the Sixties and subsequently, Paul Samuelson’s best-selling, dominant economics textbook was predicting that the Soviet Union’s GDP per capita would soon catch up with America’s. The Seventies? Most economists didn’t know how stagflation could even be possible. The Eighties? The profession opposed Thatcherism and the policies that saved the UK; infamously, 364 economists attacked Thatcher’s macroeconomic policies in the 1981 Budget and then kept getting it wrong.

Very few economists backed the then prime minister. In the Nineties, they botched the Soviet Union’s transition to capitalism and assumed that Western central bank independence and inflation targeting would end boom and bust.
In the 2000s, they were proved wrong, yet again. Today, they cannot really explain why productivity growth is so weak, why many Westerners are suffering from falling real incomes or why inflation is so low (and whether that is good or bad).
Of course, economists as a profession have also made many right calls on free trade or the need for more competition – but a massive dose of humility should be in order. It is not clear that economics has been getting better over time, unlike biology, physics or medicine.

The scientific consensus, like in all disciplines, is often the opposite of the truth and must be subject to falsification. Most economists are obsessed with market failures yet, bizarrely, assume that the intellectual marketplace, as defined by the majority view of their colleagues, is close to perfect.
The problem this time around is that Remain economists assume that leaving the EU would mean reducing globalisation and halting most immigration. They assume that there are only costs and no benefits from leaving the EU, and thus conclude that we would be mad to leave.

Ultimately, it’s a political judgment: I believe that a post-Brexit Britain, run by cosmopolitan Tories and backed by the West’s most open society, is the best way to enhance and legitimise globalisation in the UK.

I believe that the EU’s anti-democratic institutions are unsustainable and thus pose a great threat to the liberal international economic order its UK supporters claim to be defending. That is why, dear readers, I will be ignoring the majority of economists and voting Leave.
Allister Heath

Khrushchev not the only world leader to put his foot in it

The Soviet leader did not bang his shoe on the desk at the UN, says granddaughter  ,but few nations are immune to diplomatic blunders

Russian President Vladimir Putin and German Chancellor Angela Merkel are watched by Putin's dog Koni. Picture: Dmitry Astankov/AFP/Getty

HALF a century ago, Paul McCartney sang: “Her Majesty’s a pretty nice girl, but she doesn’t have a lot to say”. Now, in her 90th year, Queen Elizabeth II seems determined to put the lie to that idea.
At a genteel spring garden party on the grounds of Buckingham Palace, the British monarch recently laid into the entourage that accompanied Chinese President, Xi Jinping, to London on his state visit.
In a recorded conversation with a Metropolitan police commander, Lucy D’Orsi, the queen called the Chinese officials “very rude,” and expressed sympathy for D’Orsi’s “bad luck” in having to deal with them.
D’Orsi says Chinese officials walked out of one meeting, in London, with her and Barbara Woodward, the British ambassador to China, threatening to call off the visit. As for the queen, her joint ride, with Xi, down London’s Mall, in a horse-drawn carriage, was interrupted by a Chinese security official posing as an official translator.

Cultural clashes during high-level international visits are not unusual. In 2009, when US First Lady, Michelle Obama, briefly placed her hand on the queen’s back during a reception, the British media snorted that one must never touch the sovereign.
George W. Bush was criticised for winking at the queen following a misstatement in a 2007 speech. (Perhaps only the emperor of Japan expects foreign leaders to follow more painstakingly detailed rituals.)
There are far more egregious examples. Russian President, Vladimir Putin, notoriously allowed his large, black Labrador to nuzzle the famously dog-shy German Chancellor, Angel Merkel, at their first meeting. Photographs show Putin grinning like a schoolyard bully at this intimidation.

The discourtesies are not always so pointed. Lord Edward Halifax, the very tall British foreign secretary, almost handed his topcoat to Adolf Hitler, having mistaken the diminutive Führer for a servant.
US President, George H.W. Bush, became ill at a state banquet in Japan, vomiting into the lap of prime minister, Kiichi Miyazawa, before slumping into a stupor.

Having world leaders stay under the same roof for an extended period is dangerous, though it seemed to work for Winston Churchill and Franklin D. Roosevelt. The American and British leaders forged the closest of political friendships during Churchill’s 24-day stay in the White House, in 1941.
That visit was the occasion for one of Churchill’s most famous quips. While Churchill was in one of the White House baths, Roosevelt wheeled into the room to discuss a semi-urgent matter. Realising his mistake, Roosevelt tried to get out quickly. But Churchill stood up, naked, and proclaimed: “The prime minister of Britain has nothing to hide from the president of the United States!”
Things did not go so well for the hosts of the young Tsar Peter I of Russia, during his famous “grand embassy” tour of Europe at the end of the 17th century.

Not only did he and his entourage fail to build alliances in the fight against the Ottoman Empire; they left a slew of stately homes in a condition that might have made rocker, Keith Moon, blush.
Some readers may say that the granddaughter of Nikita Khrushchev, who, it is falsely said, gaveled his shoe on a desk at the United Nations General Assembly in 1960, should steer clear of world leaders’ manners. But there is a point to be made about the recent conduct of the Chinese. When it comes to diplomatic offhandedness, the Chinese have long had what British gamblers would call ‘form.’ On a visit to the Soviet Union, Mao Zedong famously refused to use the flush toilet adjoining his room, and instead used a chamber pot.

Perhaps he suspected that Stalin, as the BBC alleged last year, was collecting and analysing his faeces to glean information about the Great Helmsman’s temperament.
Yet Chinese officials in London on their latest visit demonstrated arrogance, offering insight into the way China’s leaders regard their country’s position in the world. They seem to believe that China has once again become the “Middle Kingdom,” occupying a central position in the world and that it demands global deference — and vassalage for its immediate neighbours.

China’s hierarchical conception of world order has deep roots, which Yan Xuetong, perhaps the country’s leading contemporary strategic thinker, explores in his books, The Transition of World Power, and Ancient Chinese Thought, Modern Chinese Power. According to Yan, China’s actions are always considered moral, because they reflect the proper “order” of the international system. Anyone failing to recognize — or, worse, directly challenging — this hierarchy is in the wrong.

That attitude can be seen in the statement of a former Chinese foreign minister, Yang Jiechi, now a member of the State Council (the central government’s executive organ).
At the ASEAN summit in 2011, Yang rebuked his Vietnamese hosts, and other ASEAN members, for refusing to accept China’s sovereignty claims in the South China Sea, saying, “China is a big country and other countries are small countries, and that’s just a fact.”
Nina L Khrushcheva is professor of international affairs and associate dean for academic affairs at The New School, and a senior fellow at the World Policy Institute.

Nina L Khrushcheva

Photos Minute: Beautiful Living

Friday, May 20, 2016

Protection of institution trumps a properly run An Garda Síochána

Whistleblower Sergeant Maurice McCabe had been subject to a character assassination in public. Picture: Laura Hutton/

IT IS one of the most infamous judgements in British history and a Hollywood movie that keep coming to mind when thinking about this latest controversy involving our Garda Síochána.
The movie is Groundhog Day and the judgement is that of the now deceased Lord Denning who threw out a civil action by the Birmingham Six against West Midlands Police in 1980 and remarked that to accept their case would have opened up “an appalling vista”. In our case it would appear to be the appalling vista of us losing a second Garda commissioner in such a short space of time, and the repercussions of that occurring, which seem to be the guiding principle, not just of Fine Gael but also Fianna Fáil.

It is a response so classic of Irish public life where words are spoken out of both sides of politicians’ mouths. People like whistleblower Maurice McCabe are feted in public and thrown to the wolves behind closed doors, all the time with the pretence that he and his actions have been in fact embraced by the establishment.

The manner in which language and meaning has been utilised by various parties attempting to spin this Commission of Inquiry report to their own advantage, or the advantage of others, has had an Alice in Wonderland quality.
How much of a comfort has it been to Maurice McCabe to have it played out in public all week that Commisioner Nóirín O’Sullivan’s instructions to her legal team were to question his motivation and his credibility in mounting these allegations of corruption and malpratice, but that his integrity was not to be questioned.

Surely in having your motivation and credibility questioned there is an automatic follow-on in terms of your integrity? It almost made me laugh to read in Judge Kevin O’Higgins’ report that Sgt McCabe was prone to exaggeration. I reckon I’d be prone to far more than exaggeration if I found myself in similar circumstances. How else might you be after so long hitting your head off a brick wall and having your reputation traduced?
Honestly if you had a friend, or indeed even a passing acquaintance, who told you that as a Garda they had witnessed unacceptable things occurring within the force, the last bit of advice you would offer is that they should blow the whistle. In fact if you had a Christian or compassionate bone in your body you’d advise them to keep their mouth closed, or if it was too unbearable to tolerate to move to Australia.

There is Sergeant McCabe hiding in plain sight as he features in all our main news bulletins over the past 10 days. Some of the coverage has been so contradictory as to be downright embarrassing.

There was a mind boggling element to watching RTÉ’s crime correspondent Paul Reynolds discussing the implications of the leaked transcripts on Tuesday night’s television news bulletins, and then to hear the same subject presented a few hours later by Prime Time’s political correspondent Katie Hannon who has done some really fine work on this story. Presenter Miriam O’Callaghan went on to conduct a superb interview with Frances Fitzgerald in what will surely rank as one of the Justice Minister’s most uncomfortable media performances.

Ever since these controversies concerning the gardaí began surfacing during the last Government the spotlight has fallen on crime correspondents and how beholden they are to their main sources — the gardaí. But there have been farcical elements to the coverage from our State broadcaster in this latest instalment, and that needs to be addressed by the station.

While I’m handing out the plaudits this newspaper’s special correspondent Michael Clifford has remained steadfast in his pursuit of this story, and moved it on at key times over the past few years when the Establishment would have far preferred it to be forgotten.

But the bulk of the praise must go to independent TDs Clare Daly and Mick Wallace for their continual role in highlighting the defects and dysfunctionality that exist in our police force. Dissent in an organisation, as she so rightly pointed out on that same Prime Time, is not disloyalty. But this is not how they view such things within An Garda Síochána. Deputy Daly was on that programme on a panel with Fianna Fáil’s Niall Collins. Minister Fitzgerald must have found it some consolation that rather than being attacked by Deputy Collins she actually had his assistance in trying to push the lid back down on this Pandora’s box full of troublesome transcripts.

Collins, who often gives the distinct impression that he might opt for a career in the Gardaí if things in politics don’t work out for him, said we needed to draw a line under this, and try to rebuild An Garda Síochána after a series of controversies. This was what the public wanted, he insisted. Listening to this from the Limerick TD you wondered if he’d used the same focus group Fine Gael relied on for their general election campaign.

His party leader Micheál Martin, who has shown good form in the past on these series of controversies, laid out the bottom line for the party on Wednesday — even as a series of important questions remained unanswered. He had confidence in Commissioner Nóirín O’Sullivan and was not “looking for her head”.

So it’s been made more than clear to us that protection of the institution is far more important than a properly run force where those who wish to highlight wrongdoing would not live in fear of their reputation and their mental health.

We are left now with a report that uncovered some amazing and disturbing episodes yet quite remarkably recommended no disciplinary action be taken. We have a Government and a Taoiseach still suffering from the trauma of the “resignation” of former Commissioner Martin Callinan. We have a Commissioner who was the ultimate insider appointed to do a job — transforming the culture in An Garda Síochána — which cried out for someone from outside the force.

We await an explanation from her on her instructions to her legal counsel regarding Maurice McCabe. But even without hearing that the political establishment has made it clear that the price of the head of another Garda Commissioner is too high too pay.

There is so much that is wrong here; we will keep ending up back in the same place unless real change is brought about.
Alison O' Connor

A wrongful hanging in Connemara, 1882

Three Irish speakers were condemned to death – in a language they did not understand – for the murder of a family in Maamtrasna in 1882 in a miscarriage of justice that resonates to this day

The handwriting was impeccable but written in a language the correspondent did not speak.
“Sir, I beg to state through the columns of your influential journal that my husband, Myles Joyce, now a convict in Galway jail, is not guilty of the crime,” a heavily pregnant Brighid Joyce said in her appeal to the editor of the Freeman’s Journal on December 11th, 1882.
Myles Joyce

“Does not everyone easily imagine a man going before his Almighty God will tell the thruth [sic], in telling the thruth they must confess that he never shared in it,” she continued.
“I earnestly beg and implore his Excellency the Lord Lieutenant to examine and consider this hard case of an innocent man, which leaves a widow and five orphans to be before long a dhrift [sic] in the world,”she concluded, signing off as “the wife of Myles Joyce that is to be executed on the 15th inst . . .”

A response to prison governor George Mason from the viceroy, Lord Spencer, coldly stated that the “Law must take its course”. Five days later, even as Brighid had given birth to a daughter, The Irish Times was at the Galway scaffold.
“At a quarter-past eight o’clock the prison doors were thrown open,” the paper’s correspondent noted in his report published on December 16th, 1882.

“With startled looks they marked the wild, hollow eyes, sunken cheeks, and shrunken forms of each other, but not a word passed between them. Myles Joyce came first, between two warders, bareheaded, repeating in Irish the responses to the prayers which were being read by the Rev Mr Grevan.
“Then came Pat Casey, pinioned, silent, and with a look of great agony on his features. Last appeared Pat Joyce, taller than the others, wearing his hat, silent, too, and walking with firm and steady step . . . ”

Last words
The executioner, William Marwood, then placed them with the tallest man in the centre, and began pinioning the knees. Myles Joyce continued to speak in an “excited way”, the correspondent said.
“It was impossible to gather the meaning of much that fell from him, even by Irish-speaking persons who were present; but the following sentences have been interpreted for me by one who understands and speaks the language thoroughly, and who was close enough to hear the greater part of what he said.
“These sentences were: ‘I am going before my God. I was not there at all. I had no hand or part in it. I am as innocent as a child in the cradle. It is a poor thing to take this life away on a stage; but I have my priest with me.’ ”
Worse was to come.

“Two of the ropes remained perfectly motionless, but the third, that by which Myles Joyce was hanged, could be seen by those who watched it closely to vibrate, and swing slightly backwards and forwards,” the report stated.
“It soon became evident, from Marwood’s behaviour, that there had been a hitch of some kind or other, and he muttered, ‘bother the fellow’, sat down on the scaffold, laid hold of the rope, and moved it backwards and forwards . . . ”
It may have been 134 years ago, but on the Galway-Mayo border they still remember the horrific deaths and ensuing miscarriage of justice associated with Connemara’s Maamtrasna murders.

When John Joyce; his wife (also called Brighid); his mother, Mairéad; his daughter Peigí; and son Micheál were killed in Maamtrasna valley, it was presumed that the motive was connected with stealing sheep. The offence was regarded as serious at a time of severe poverty and hardship in the west.

Only two of the family survived the attack: a nine-year-old boy, Patsy, who was badly injured, and his older brother Mairtín, who had been working as a farmhand in a neighbouring parish and was away from home that night. Eight men were convicted on the basis of what emerged later to be perjured evidence. Three of the eight were executed and five imprisoned.

A kind of confession
Two years afterwards, in August 1884, Tom Casey, who was one of the witnesses, walked up to the altar of the church in Tourmakeady during Confirmation Mass by the archbishop of Tuam, Dr John McEvilly. Holding a lit candle, Casey declared he had caused the death of an innocent man, Myles Joyce, and the imprisonment of four others who were not guilty. There were subsequently lengthy debates in the British parliament, with Charles Stewart Parnell and colleagues demanding an inquiry. There has never been an official apology.

The Maamtrasna saga is a mix of “murder mystery, courtroom drama and political intrigue”, says journalist Seán Ó Cuirreáin, who has uncovered previously unreported detail for his new book, Éagóir. For instance, Ó Cuirreáin has come across a letter from the sheriff’s office in Galway asking the hangman, William Marwood, from Lincolnshire, if he would do a cut-price job as the executions would all take place on one day. “I have to remark that the law does not allow the Sheriff anything for these executions and that he has to pay the entire cost out of his pocket,” the officer wrote to Marwood, offering him £20.

While perusing the British archives in Kew, Ó Cuirreáin also discovered that a move to pay the witnesses bore the personal hand of lord-lieutenant the Earl Spencer, great granduncle of the current princes Harry and William. Not only did he compensate three men who claimed to be eye witnesses, but he paid them well over the going rate: a sum totalling £1,250, equivalent to about €157,000 today.

Ó Cuirreáin’s account notes that the accused men’s solicitor was a 24-year-old Trinity College graduate who didn’t have a word of Irish. The men themselves had no idea what was going on in court due to the language barrier. The court records one of them, bewildered, asking “Cén lá a chrocfar mé?” (“What day will I be hanged?”).
The five who received a reprieve languished in prison in spite of the fact that the man who had planned and directed the murders was named publicly in print and in parliament. Ó Cuirreáin publishes some of the letters dictated by the five to their spouses at home.

“I am in very good health, thank God. I have every convenience,”one of the men, Jihn Casey, wrote, clearly trying to remain positive. “It is very hard for me to have been in prison and separated from my family, especially when I am innocent,” he said. “Let me know are the crops promising this year . . .” The first to champion their case was a journalist and MP, Tim Harrington, who met some of them when he was convicted for participating in anti-eviction protests.

“Harrington did all the good things an investigative journalist would do, visiting the area with two priests in 1885,” Ó Cuirreáin says. “He even named the instigator, who was never charged, because even back then the British government couldn’t contemplate the ‘appalling vista’ of having to admit to convicting innocent people.”

The two survivors
As for the two children who survived, they were sent to Artane industrial school in Dublin. One of them, Mairtín, spent time in Britain and the US before returning to Dublin. Two of Mairtín Joyce’s sons were members of the senior Dublin GAA team playing in Croke Park on Bloody Sunday in 1920, when British forces opened fire on the crowd and killed 14 civilians.

Ó Cuirreáin says he was attracted to the case for a number of reasons, not least the fact that it was a “language issue”: the men who had no English were tried and convicted in an English-speaking court. Although there have been other accounts, Éagóir is the first book published in Irish, and he undertook this “as a mark of respect to the men and their families”.

Five years ago, two members of the House of Lords, David Alton and the late Eric Lubbock, sought to have the case reviewed. Britain’s justice minister, Crispin Blunt, conceded that Myles Joyce was “probably an innocent man” but said he would not seek a posthumous pardon unless there were “compelling new reasons or sufficient public interest”.

Lord Alton has close family ties with the Maamtrasna area. He says the case opened prime minister William Gladstone’s eyes to the “injustices in Ireland and paved the way for his support for land reform, for Irish home rule and for his ‘mission to pacify Ireland’.”

Pointing to the parallels with the Birmingham Six and Guildford Four, Lord Alton has said that “the true healing of British-Irish relations requires that, wherever possible, ghosts should be laid peacefully to rest and wrongs righted. If we forget the lessons of history, or try to erase those experiences from our identity, we will be condemned to make the same errors all over again.”

Lorna Siggins

Éagóir by Seán Ó Cuirreáin is published by Cois Life

Tuesday, May 17, 2016

What will happen in Ireland if there is another global financial crisis?

Whatever you do, now is not the time to bet it all on black, by borrowing up the wazoo, by stuffing money away into 'tracker' bonds.

IF there is another global financial crisis, will Ireland be governed by an experimental, minority administration during it?
This is a valid question. Last week, I issued a note to clients that, over the next two to three years, there may be just such a crisis. It’s not a certainty, because central banks may manufacture a soft landing, a gradual repair of debt from slow-cooked growth, but stock markets have moved sideways for a year, and that looks like a portent of trouble. To the left and right of the runway lurk deflation and high inflation, which are both unpleasant.

Should you take notice? In the book Loot, in 2006, I warned about the risk of a burst in the US and advised the reduction of debt to less than 50% of asset values, a move to AAA-rated banks, and the buying of gold. What I didn’t foresee was the interconnectedness of the globalised economy and its capacity to spread contagion — that nowhere was safe.

To understand, take Ireland; we have the highest GDP growth in Europe, so why did Fine Gael’s slogan about spreading the recovery fail? Is it because consumers remain intermediaries between extra economic growth and banks? The big global question: is there too much debt, not just consumer debt, but all debt, and not enough economic growth to carry it? If so, no amount of money-printing will solve what is a structural problem. This is not a certainty.
The political classes handed over the fight to central banks, which, by crushing interest rates and printing money, are using their weapon of choice for cyclical recessions. What if the illness is not cyclical, but structural: ie, too much debt?

Take Ireland again; add our national debt to private-sector debt and non-financial corporate debt, and throw in the off-balance-sheet liabilities in public sector pensions, and the social insurance fund that pays out old-age pensions, and the economy is servicing debt five times its GDP, or close to €1tn. That multiple is little different for many developed countries, with Japan, which is grappling with its ageing workforce, the outlier and already after experiencing decades of deflation.

Underneath the developed world, two magnetic plates are pushing in different directions: deflation and inflation, and the result is disinflation. But if you take John Maynard Keynes’s definition of depression as a long period of chronic, sub-normal growth, without any tendency towards either collapse or recovery, he was foretelling the last number of years, from 1936, of the Great Depression.

Central banks are betting this is merely a long-term, low-growth, ultra- low inflation interregnum, before the next normal cycle, while the excess debt is cleansed from the body of the global economy.

Despite earnest endeavour, the old models used by economists seem incapable of grasping the complex systems that now underpin the global financial web. This is a concern, because adding more debt creates greater, not lesser, instability and magnifies the potential for contagion.
Sustained, very-low energy prices could cause the next default wave from corporate debt rollovers, but the default could just as easily pop out of China, or Brexit, or premature rising of interest rates in the US. It is not the last straw that causes the tipping point, but the combined weight of everything before.

When consumers lose faith in economic management, cash gets hoarded, creating the conditions for deflation, or the expectation of lower prices. Central banks fight with inflation by printing money, hoping that banks will lend it as credit.
But with the muted velocity at which money is circulating, with tight credit conditions and low consumer demand for credit, is it beginning to look like the stimulation of demand isn’t working?

The response will be to print more money, until inflation arrives. The big question, then: can central banks reverse quantitative easing before a spiral of wage increases to match rising prices? Inflation is a burglar, tip-toeing in unnoticed, before becoming widely recognised. If not controlled, it can end up in hyper-inflation. There is no sign of inflation, just yet, so deflation remains the short-term risk, but an outbreak of high inflation is the long-term one.
If there is another global financial crisis, the rules of the game have changed. Just ask the Cypriots. Last time, Ireland entered the crisis with debt-to-GDP at under 25%. It peaked at over 120%, and this year it’s expected to be below 90%. External assistance to a highly indebted country will only arrive after bail-ins, haircuts to deposits, levies on financial assets, and the part or full nationalisation of pension funds.

Last-minute escapes are closed off by shutting banks, typically after close of play on a Friday, and, from Monday, rationing cash while raising exchange controls.
The state will do anything to self-preserve, including fast-tracking emergency powers. A great reset would require debt write-offs through the type of global agreements that accompanied previous emergencies, but the world that would emerge would look very different, if many of its currencies are in intensive care.

Relax. None of this is certain, but be prepared. Do up a lifestyle budget for when income sharply falls. Get out of long, only-unit-linked funds, including pensions stuffed with equities that require you to ride out cycles typically called managed, consensus, or lifestyle funds. Move to defensive funds, including those that give the fund manager the mandate to sell the market short and make gains in falling conditions. Get rid of debt, but keep strong cash levels. Open an account at a ‘safe’ bank or credit union. Put money into funds outside of the jurisdiction, for example at the Luxembourg financial centre, to reduce risk from domestic levies.
Gold is a currency. It is ‘money’, and holding up to 10% of liquid assets in gold, as a hedge against both deflation and inflation, especially if there is a loss of confidence in paper currencies, makes sense. You can have allocated gold in your name in vaults in Zurich, buy certificates for non-allocated gold, from mints like Australia’s Perth Mint, or use life offices in Ireland that have gold funds.

Global, inflation-linked sovereign bonds, issued by major governments and available through specialist funds, are another asset class that make sense. These will respond to unexpected higher inflation and, although a little more volatile than conventional, fixed interest bonds, ‘linkers’ can be a safe haven from risky assets, if there’s a moderate deflationary event.
Watch for liquidity traps. Whatever you do, now is not the time to bet it all on black, by borrowing up the wazoo, by stuffing money away into ‘tracker’ bonds guaranteed by low-grade banks, or by buying illiquid trophy houses at prices that look like they might be artificially inflated by money-printing.

These risks are elevating, even if this opinion runs contrary to the consensus.

Eddie Hobbs 

Photos Minute: Rain may be on the way!!

Nóirín O’Sullivan leaves key questions unanswered

Last night’s statement from Commissioner Nóirín O’Sullivan falls short of a full response.
The commissioner issued a statement following concerns in the wake of the Irish Examiner story last Friday that her legal team at the O’Higgins Commission had alleged that Maurice McCabe was motivated by malice.
The allegation was conveyed to Kevin O’Higgins last May at the outset of the commission’s hearings. It was alleged that there would be evidence of malice from two officers who attended a meeting in Mullingar with Sgt McCabe in which he expressed malice.

When asked by Mr O’Higgins if he intended attacking Sgt McCabe’s motivation and character, Commissioner O’Sullivan’s lawyer replied, “right the way through”.

Sgt McCabe’s counsel Michael McDowell objected in the strongest terms.
“Attacking one of our own members of our force who is in uniform and on oath when in circumstances where in public she promoted him to a professional standards unit and in public she has indicated that she accepts that he was acting in good faith et cetera, et cetera, and in private she sends in a legal team to excoriate him.”
The attempt to blacken Sgt McCabe’s character was abandoned when he produced a tape recording of the meeting in question in which he expressed no malice whatsoever.
In his report, O’Higgins accepted totally Sgt McCabe’s bona fides and went on to say that the sergeant was due “not just the gratitude of the general public but of An Garda Síochána”.

Yet this is much bigger than the apparently appalling treatment of one officer.
McDowell’s above submission encapsulates the commissioner’s current dilemma.
How can she, with any credibility, now ask any of her officers to speak out when they see something wrong if this is how one of them was treated for doing so behind the closed doors of a commission of inquiry? Without an explanation for why she acted as she did behind those closed doors of the commission she has no moral authority to ask any garda to ever stick his or her head above the parapet to expose wrongdoing.

Commissioner O’Sullivan’s statement last night did not fully address the issues now in the public domain. She said that, while precluded from commenting on the O’Higgins commission, “Like every member of An Garda Síochána, Sergeant Maurice McCabe’s contribution is valued and the service has changed for the better in response to the issues about which he complained. I want to make it clear that I do not — and have never, regarded Sgt McCabe as malicious.” That, however, does not explain what transpired at the commission last May. Despite her comments of being precluded by law, that position was challenged yesterday by the Labour Party’s Joan Burton who pointed out that the law in question prohibits revealing any “evidence given by a witness in private to a commission of investigation”. The submission by the commissioner’s lawyer was not evidence and therefore is not covered by the law in question.

The Morris Tribunal into garda malpractice in Donegal recognised the importance of whistleblowers within the force. Morris found that much of the malpractice and criminality that gripped small elements of the force in Donegal could have been avoided if somebody had listened and acted on the initial concerns of a rank-and-file Garda.

This was subsequently recognised in the establishment of the confidential recipient system which opened up an avenue for gardaí to express their concerns outside the force. The system was exposed as having major flaws in how it dealt with Sgt McCabe, but it was an attempt to facilitate whistleblowers.
Wherefore now for the garda who sees something wrong? He or she will have noted how Sgt McCabe was treated. He or she will see that the price of standing up for what is right could mean not just the suspicion of colleagues, but implicit condemnation from on high.

Commissioner O’Sullivan has expressed the view that whistleblowers in the future will be listened to by management. Can such a view carry any weight in light of the revelations of what Sgt McCabe was subjected to at O’Higgins? Are regular officers to take the high moral stance as a nod and wink to appease those outside the force, in politics and among the citizens, while the old value system of circling wagons persists?
The commissioner has said she is statute barred from commenting on anything that transpired at the inquiry.
There is nothing to stop the commissioner clarifying her position on Sgt McCabe, which she did in her statement last night, but also on whether or not she had been misinformed about events that might have led her to form such an opinion.

She could also indicate whether any officer is being subjected to disciplinary action if she was misinformed about what transpired at that meeting in Mullingar referenced at the commission. After all, the commission was told that sworn evidence would be heard to the effect that Sgt McCabe had expressed malice.
She might also explain why she was, at the very least, so willing to go along with an attempt to impugn the character of Sgt McCabe in light of her public pronouncements about him.
Anything less than a full explanation will call into question the commissioner’s ability to continue to lead the force with moral authority. Anything less than a demand from the Government of an explanation will indicate a willingness to turn a blind eye to a major shortcoming in the force.
Questions also arise for Mr O’Higgins. Why did he make no reference to this attempt to impugn Sgt McCabe’s character?

There were at least five instances in the report where there were attempts to lay the blame at McCabe’s door for malpractice. In each case O’Higgins accepted McCabe’s version of events and rejected the alternative. Yet he drew no conclusion from this pattern.
We now know that there was also a specific attempt from the top of garda management to impugn McCabe, yet the combined evidence of that along with the pattern in individual cases didn’t prompt O’Higgins to draw any glaring conclusions.

What if McCabe had no record of the meeting in question? Would the evidence of the other two officers have been accepted, and fed into the final report? It would have been a very different report if so.
There is no mechanism for questioning O’Higgins, but the whole episode has left a shadow over the inquiry.
The garda commissioner is in a different position. She has issued a statement which has left most of the questions still hanging in the air.

O’Sullivan statement
'As previously stated, An Garda Síochána has fully accepted the findings and recommendations of the O’Higgins Commission. We will examine what lessons can be learnt and ensure the issues arising are fully addressed.
Our immediate concern, arising out of the O’Higgins Commission, must be with victims who believe - with justification, they were not dealt with properly by An Garda Síochána. We are sorry the victims did not get the service they were entitled to, and we will seek to work with them.

A key element of our modernisation and renewal programme is ensuring victims are at the heart of the Garda Service and they get the service they are entitled to. In order to ensure a victim centred approach our first steps have been the setting-up of 28 Victim Service Offices throughout the country to keep victims up-to-date on the progress of their case through the justice system and the establishment of the National Protective Services Bureau, which among its work provides support for vulnerable victims. These measures will help ensure we meet our obligations under the EU Victim Rights Directive.
We are learning from our past mistakes and following a number of reports in recent years, improvements in relation to how An Garda Síochána conducts investigations, manages incidents, trains its personnel, and liaises with victims of crime have been introduced or are in the process of being introduced as part of An Garda Síochána’s modernisation and renewal programme.

Every day, the men and women of An Garda Síochána do great work to protect and support communities. In doing this, they consistently show great depth of character, resolve and commitment. The initiatives we are undertaking as part of our modernisation and renewal programme are designed to ensure they have the necessary supports to provide the very best service to the communities we serve.
I have been asked to clarify certain matters in relation to the proceedings before the O’Higgins Commission.
I am legally precluded from so doing under section 11 of the Commissions of Investigation Act 2004, which provides that it is a criminal offence to disclose or publish any evidence given or the contents of any document produced by a witness.
The witnesses who gave evidence before the Commission did so on the expectation that their evidence, except as may be included in the final report, would remain private.
Accordingly, I have been advised that I cannot discuss the details of any proceedings before the O’Higgins Commission.

I have consistently and without exception, within An Garda Síochána and in public, stated clearly that dissent is not disloyalty, that we must listen to our people at every level with respect and with trust, and that we stand to gain, rather than lose, when members bring to our attention practices they believe to be unacceptable.

Like every member of An Garda Síochána, Sergeant Maurice McCabe’s contribution is valued and the service has changed for the better in response to the issues about which he complained. I want to make it clear that I do not - and have never, regarded Sergeant McCabe as malicious.
Any member of An Garda Síochána who raises issues will be fully supported. Each and every one of them must know they have the right and responsibility to raise their concerns and be confident that they will be listened to and addressed.
They won’t always be right and we in management won’t always be right either.
But we are on a journey towards a markedly better policing service and we will learn from every mistake we make.'
Michael Clifford