Irish political economy for activists and trade unionists.

1. Irish Political Economy for Trade
Unionists and Activists
4. Debt

3. “… a tangled
interaction
between the
market and
the state….”

4. The commercial
creation of debt has
slipped from public
control…

5. The commercial
creation of debt has
slipped from public
control…
Although not from
public liability.

6. While the capitalist
financial system has
privatised the money
system, it remains a
system of social
trust.

7. While the capitalist
financial system has
privatised the money
system, it remains a
system of social
trust.
The market alone
cannot sustain it.

11. Page.37
This creation of credit-money by lending in
the form of issued notes and bills, which
exist independently of any particular level
of incoming deposits, is the critical
development that Schumpeter and others
identified as the differentia specifica of
capitalism.
If banks could not issue money they could
not carry on their business.
Credit creation is the actual business of
banking

12. Page.39
It is clear that in the late twentieth and
early twenty-first centuries, the bank credit
creation system was not just responding to
the needs of production but to the demands
of speculative inflation.
Page.40
As states were receiving the product of
uncontrolled credit creation, the public
would eventually have to pay the price in its
role as guarantor of the money system.

13. Page.47
Money was seeking a way to make more
money, but with so much ready money
available, there was a limit to where viable
investments could be found.
Page.48
Securitisation – ‘originate to distribute’

35. LIQUIDITY AND FINANCIAL ASSETS
Like a real asset, a financial asset may have more than one function. In addition to serving as
a store of wealth, a financial asset may make it possible to transfer risk from one person to
another, and may make it possible for speculators to make "bets" on the fortunes of a
particular company.
- Fischer Black, “Fundamentals of Liquidity” (1970)

36. LIQUIDITY AND FINANCIAL ASSETS
Like a real asset, a financial asset may have more than one function. In addition to serving as
a store of wealth, a financial asset may make it possible to transfer risk from one person to
another, and may make it possible for speculators to make "bets" on the fortunes of a
particular company.
But these functions are separable. There is no reason why the person who supplies the money
for a financial asset should take the risk associated with the asset. And the risk can be
transferred from one person to another independently of any transfer of the money
investment from one person to another.
- Fischer Black, “Fundamentals of Liquidity” (1970)

37. LIQUIDITY AND FINANCIAL ASSETS
Like a real asset, a financial asset may have more than one function. In addition to serving as
a store of wealth, a financial asset may make it possible to transfer risk from one person to
another, and may make it possible for speculators to make "bets" on the fortunes of a
particular company.
But these functions are separable. There is no reason why the person who supplies the money
for a financial asset should take the risk associated with the asset. And the risk can be
transferred from one person to another independently of any transfer of the money
investment from one person to another.
…a long term corporate bond could actually be sold to three separate persons. One would
supply the money for the bond; one would bear the interest rate risk; and one would bear the
risk of default. The last two would not have to put up any capital for the bonds, although they
might have to post some sort of collateral.
- Fischer Black, “Fundamentals of Liquidity” (1970)

38. Residental / Commercial Mortgage Backed Securities

41. Failing to see that commercial money
creation was behind the flood of money in
the new financial world, bankers and
financiers congratulated themselves on the
amount of money they were making.
As money markets have grown, bringing
together a wide range of financial
organisations including the banks, the
privatised financial system is effectively
creating money for itself.
Mary Melor, The Future of Money (Pluto Press, 2010), p.53

53. Irish Mortgage-Backed Securities listed on Irish Stock
Exchange, April 2012
AIB Mortgage Bank (AIB) - €11.87 billion
Celtic Residential Irish Mortgage Securitisation - (Ulster Bank) - €20.6 bn
Phoenix Funding Limited - (KBC Bank) - €11.55 billion
Emerald Mortgages (EBS) - €4 billion
Kildare Securities (Bank of Ireland) - €3.45 billion
Fastnet Securities (Irish Life & Permanent) - €23.774 billion
Lansdowne Mortgage Securities (Start Mortgages) - €729 million
Total listed (of those found) : €75.973 billion
http://dublinopinion.com/2012/04/02/irish-mortgage-backed-securities-initial-notes/
http://dublinopinion.com/2012/04/04/irish-mortgage-backed-securities-part-two/
http://dublinopinion.com/2012/06/08/update-on-amoroin-securities-from-clare-day-td-6-june-2012/

57. Irish Executives in the six
lenders must have been
rubbing their hands with
glee as the State-sponsored
€400 billion insurance
policy covers commercial,
institutional and interbank
deposits, and investors who
have bought some of their
debt.
The State guarantee allows
the six lenders to borrow
more freely and more
cheaply for short-term
funding that had become
scarce due to the global
credit crunch.

58. Mr. Lenihan said on
Tuesday that the
increase on the cap on
deposit guarantees up
to €100,000 from
€20,000 last month
covered 97 per cent of
customer deposits so
the guarantee has
clearly been included
for the benefit of the
banks rather than the
savers…

59. “Denis Casey, chief
executive of Irish Life
and Permanent, said
the guarantee would
allow Permanent TSB
and the other Irish
banks covered to
borrow more cheaply.
“The oxygen supply for
Irish banks was being
cut off and healthy
banks were starting to
gasp for breath. This
guarantee turns on
the oxygen supply.”