Next stage in the Celtic Tiger’s downhill spiral: sovereign default?

Professor Morgan Kelly of University College Dublin has written a terrific analysis of the banking crisis which still threatens the economic viability of my homeland. His conclusion:

By pushing itself close to, and quite possibly beyond, the limits of its fiscal capacity,the Irish state has succeeded in rescuing Irish banks from their losses on developer loans. Despite this, these banks remain as zombies entirely reliant on continued Irish government guarantees and ECB forbearance, and committed solely to reducing their own debts. While bank capital levels are, probably, adequate for the markedly smaller scale of their future lending, … even fairly modest losses on their mortgage portfolios will be sufficient to wipe out most or all of that capital. Having exhausted its resources in rescuing the Irish banks from the first wave of developer losses, the Irish state can do nothing but watch as the second wave of mortgage defaults sweeps in and drowns them.

In other words, it is starting to appear that the Irish banking system is too big to save. As mortgage losses crystallise, the Irish government’s ill conceived project of insulating bank bond-holders from any losses on their investments is sliding beyond the means of its taxpayers. The mounting losses of its banking system are facing the Irish state with a stark choice. It can attempt a NAMA II for mortgage losses that will end in a bond market strike or a sovereign default. Or it can, probably with the assistance of the IMF and EU, organise a resolution that shares property losses with bank creditors through a partial debt for equity swap.

Thanks to Gavin Sheridan and the unmissable The Story for the link.

An antidote to Kindlemania

This morning’s Observer column.

A strange thing happened at Christmas. Well, two really. Amazon.com reported that its Kindle eReader had become the “most gifted” product in its vast inventory; and on Christmas Day sales of eBooks on its site exceeded those of physical books. The phenomena are, of course correlated: all those recipients of Kindles needed to buy something they could actually read on the devices. But the combination of the two ‘facts’ has further ratcheted up speculation that 2010 will be the Year of the Kindle and the end is nigh for the printed codex.

If you detect a whiff of what philosophers call ‘technological determinism’ in this, you’re in good company. I have on my shelves a (printed) copy of The Myth of the Paperless Office by Abigail Sellen and Richard Harper, a wonderful antidote to the irrational exuberance of Kindlemania. The authors conducted an ethnographic study of how people actually use paper in order to reach an understanding of which of those uses might conceivably be eliminated by electronics, and which might not. It should be required reading for anyone showing the early symptoms of Kindlemania…

Obama’s West Point speech

If you found Obama’s speech setting out his Afghan strategy as unsatisfactory as I did, then you’ll enjoy this dispatch from Gabor Steingart of Der Spiegel. It reads, in part:

“Never before has a speech by President Barack Obama felt as false as his Tuesday address announcing America’s new strategy for Afghanistan. It seemed like a campaign speech combined with Bush rhetoric — and left both dreamers and realists feeling distraught.

One can hardly blame the West Point leadership. The academy commanders did their best to ensure that Commander-in-Chief Barack Obama’s speech would be well-received.

Just minutes before the president took the stage inside Eisenhower Hall, the gathered cadets were asked to respond “enthusiastically” to the speech. But it didn’t help: The soldiers’ reception was cool.

One didn’t have to be a cadet on Tuesday to feel a bit of nausea upon hearing Obama’s speech. It was the least truthful address that he has ever held. He spoke of responsibility, but almost every sentence smelled of party tactics. He demanded sacrifice, but he was unable to say what it was for exactly.

An additional 30,000 US soldiers are to march into Afghanistan — and then they will march right back out again. America is going to war — and from there it will continue ahead to peace. It was the speech of a Nobel War Prize laureate.”

The decade with no name

The New Yorker has a lovely essay by Rebecca Mead about the decade that ended last night. In almost every way one looks at it, the ‘noughties’ look like a wasted decade.

The events of and reaction to September 11th seem to be the decade’s defining catastrophe, although it could be argued that it was in the voting booths of Florida, with their flawed and faulty machines, that the crucial historical turn took place. (In the alternate decade of fantasy, President Gore, forever slim and with hairline intact, not only reads those intelligence memos in the summer of 2001 but acts upon them; he also ratifies the Kyoto Protocol and invents something even better than the Internet.) And if September 11th marked the beginning of this unnameable decade, its end was signalled by President Obama’s Nobel acceptance speech, in which he spoke of what he called the “difficult questions about the relationship between war and peace, and our effort to replace one with the other,” and painstakingly outlined the absence of any good answers to the questions in question.

In between those two poles, the decade saw the unimaginable unfolding: the depravities of Abu Ghraib, and, even more shocking, their apparent lack of impact on voters in the 2004 Presidential election; the horrors of Hurricane Katrina and the flight of twenty-five thousand of the country’s poorest people to the only slightly less hostile environs of the Superdome; the grotesque inflation and catastrophic popping of a housing bubble, exposing an economy built not even on sand but on fairy dust; the astonishing near-collapse of the world financial system, and the discovery that the assumed ironclad laws of the marketplace were only about as reliable as superstition. And, after all this, the still more remarkable: the election of a certified intellectual as President, not to mention an African-American one.

Chelsea-on-Sea

To Burnham Market, the poshest small town in England, for lunch. It’s still the lovely place I remember from when we used to go there two decades ago, but has gone spectacularly up-market — to the point where it now resembles nothing so much as Chelsea-on-Sea. Streets choc-a-bloc with Porsche Cayman and Toucan Touareg SUVs, boutiques selling trinkets that cost more than the Gross National Product of Ecuador, cheery gels with names like Camilla and Eugenie and Amanda wearing green wellies — you can imagine the scene. But still, unaccountably, charming. I was reminded of the time, years ago, when a good friend of mine dreamed of buying a little house in Burnham Market and settling down to a career writing scandalous novels. (She never managed it, and became an academic instead. But today I imagined her casting an ironic eye on the visiting Yuppies, and using them as characters in a comic novel.)

Our plan was to lunch in the Hoste Arms, but given that (a) we arrived at 1pm, (b) it was wet and cold (and (c) the middle of the holiday season to boot) we should have known better: it was heaving with lunchers. So we found a small cafe and had lovely pea soup and sandwiches instead.

And then we stumbled on the loveliest little secondhand bookshop which had the best collection of biographies I’ve seen in a while — including Chester Anderson’s short illustrated biography of Joyce and the fascinating biography that John Wyse Jackson and Peter Costello wrote of John Joyce, James’s reprobate of a father. I walked out clutching both, and only £11 poorer. Bliss.

How to hold onto your staff

Now that the fuss over public sector pay has undermined the BBC’s ability to hold onto their frontline staff by giving them golden handcuffs, they’ve taken to keeping them on a leash. This example from last night’s BBC News.

Into the wind

We reached Cley yesterday afternoon just as the light was running out. It was a grey, overcast day when all of Norfolk seemed to have gone brown (though if you looked carefully at the hedgerows that turned out not to be true: there were red berries everywhere). As we turned towards the beach a huge flock of birds suddenly started into the air, turning and twisting and making those astonishing fleeting patterns that lead mathematicians to work out flocking algorithms. And they headed seawards and were gone from sight, almost as quickly as they had appeared. We parked under the shingle bank, now much reduced since its glory days, and prepared to get out for what we imagined would be a brisk walk. But then I opened the car door the wind promptly forced it shut again, so it was clear that something more than a brisk constitutional was on offer. Something that required firm resolve — and serious outerwear. So we opened the boot and, in the shelter of the lid, dressed as for the South Pole.

When we got to the top of the bank, the full force of the wind hit us. There was an angry brown sea, with a heavy swell and sizeable waves pounding against the shore. Interestingly, they were coming in at an angle of about fifteen degrees to the line of the beach, so suddenly one saw how this coastline is constantly being reshaped.

We turned into the wind and began to walk. It was eye-wateringly cold, with the wind scything through anything (like trousers and hats) that wasn’t comprehensively windproof. And yet the strange thing was that the beach was dotted with tiny, pyramidical structures which, on closer inspection, turned out to be tented bivouacs, each one containing a fisherman who sat there, staring intently at a massive fishing rod, resting on a tripod support, and each at the end of a line which had been cast far out into the raging surf. It was absolutely surreal, and made one wonder what it is that induces people to undergo such discomfort in pursuit of private obsessions. And then to marvel at it, for it is what makes us humans so interestingly perverse.

But much as I admired the fishermen’s fortitude, mine wilted in the teeth of the gale, and we turned back and sought the shelter of the car and, later, the blazing fire of an hotel. Ernest Shackleton would not have been impressed.

The Noughties: the Big Zero

Nice NYT column by Paul Krugman looking back on a wasted decade.

From an economic point of view, I’d suggest that we call the decade past the Big Zero. It was a decade in which nothing good happened, and none of the optimistic things we were supposed to believe turned out to be true.

It was a decade with basically zero job creation. O.K., the headline employment number for December 2009 will be slightly higher than that for December 1999, but only slightly. And private-sector employment has actually declined — the first decade on record in which that happened.

It was a decade with zero economic gains for the typical family. Actually, even at the height of the alleged “Bush boom,” in 2007, median household income adjusted for inflation was lower than it had been in 1999. And you know what happened next.

It was a decade of zero gains for homeowners, even if they bought early: right now housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade. And for those who bought in the decade’s middle years — when all the serious people ridiculed warnings that housing prices made no sense, that we were in the middle of a gigantic bubble — well, I feel your pain. Almost a quarter of all mortgages in America, and 45 percent of mortgages in Florida, are underwater, with owners owing more than their houses are worth.

Last and least for most Americans — but a big deal for retirement accounts, not to mention the talking heads on financial TV — it was a decade of zero gains for stocks, even without taking inflation into account. Remember the excitement when the Dow first topped 10,000, and best-selling books like “Dow 36,000” predicted that the good times would just keep rolling? Well, that was back in 1999. Last week the market closed at 10,520.

So there was a whole lot of nothing going on in measures of economic progress or success. Funny how that happened.

eBooks outsell real books on Amazon at Christmas?

From Engadget.

We’re still not about say the e-book reader industry has branched out beyond the infancy stage, but one of its flagship products certainly has reason to celebrate. Amazon has announced it’s hit some pretty big milestones with the Kindle. The two bullet points it’s currently touting loudest is that the reader has become “the most gifted item” in the company’s history — quite an achievement given the size of the online retailer, but what’s missing here is any quantitative sales data to give us even a ballpark of the number of units sold. The other big news is that on Christmas Day (we’re guessing not Christmas Eve, else the press release surely would’ve mentioned it, too), e-book sales actually outsold physical books. Those brand new Kindle owners needed something to read, right? It’ll be interesting to see if that momentum is maintained through next year, especially with some major publishers starting to show some teeth with digital delays.

The Kindle bits were all part of Amazon’s annual post-holiday statistical breakdown, so in case you’re wondering, besides Kindle, the company is claiming its other top-selling electronics were the 8GB iPod Touch and Garmin nuvi260W, and in the wireless department the honor goes to Nokia’s unlocked 5800 XpressMusic, Plantronic’s 510 Bluetooth headset, and AT&T’s edition of the BlackBerry Bold 9700.