During the last decade, the unemployment rate hovered around 4% for the 8 years before the crash in 2008. This means that 96% of people, a huge majority will work when there is work available. . 96% employment is considered to be full employment in practical terms for a modern capitalist economy. It doesn’t get any higher. This leaves only 4% unemployed and only a tiny fraction, 0.25% were long term unemployed for over 12 months.

Even if we assumed that the measured low of 4% unemployed were all unwilling to work (which is clearly not the case). 4% of the current total Labour Force of 2.2 million approximately equates to 88,000 people. It would take 88k people each claiming €200 per week in payments, 123 years before the total would match the €113 billion and counting that has been extorted from Ireland to pay for the bank bailout.

The true parasites don’t live at the bottom of the pyramid. They reside on the top in areas like finance and politics and the majority are paying for their greed in a thousand different ways including the systemic deconstruction of our state pension supports as explained in the article.

You wouldn’t of had the 4% unemployment without them in the first place though would you?? Seems a stereotypical left wing argument there, the only reason the banks let out the money outside the restrictions was because people like you and I wanted to borrow it in the first place

Yeah but wally if these 88k able bodied people earned the average salary and didn’t claim social welfare then in 61.5 yrs that €113billion would be paid so you’re usual cut and paste is nonsense.

Oisin,
You do understand that the disintegration of the entire Irish commercial banking system had nothing to with ordinary mortgage holders who borrowed to put a roof over their heads?

The 6 Irish banks went bust in 2008 due to their exposure to vast developer loans. As the big property speculators and developers began defaulting on their enormous loans, the banks assets began to tumble as they wrote off the bad debts and very quickly the liability side of the balance sheets exceeded the asset side, so making the banks insolvent. The ordinary people had nothing to do with the bank collapse as they were still paying their inflated mortgages at this time.

You should also understand where the money which the commercial banks loan out originates from.
Each time a bank issues a loan, it brings new money into existence by the simple act of pressing a computer keyboard. The loan creates a new deposit as the Bank of England confirmed in 2007:

“By far the largest role in creating broad money is played by the banking sector…when banks make loans they create additional deposits for those that have borrowed.”

http://www.neweconomics.org/publications/entry/where-does-money-come-from

A commercial bank creates new money each time they issue a loan. A banking license is effectively a permission to create money as granted by the state to a private institution. The banks are only authorized to create the money to meet a loan request and cannot simply add the money to their balance sheet in a single entry as profit. When a bank issues a new mortgage for €200k for example, the mortgage loan is entered on the Asset side of the bank balance sheet while the newly created deposit of €200k appears on the Liability side of the balance sheet. This is how the new money is recorded in the double entry accountancy system.

As you pay off your mortgage over the 25 year term, the principal €200k amount is reduced and the money is extinguished/deleted as the outstanding mortgage falls to zero. The bank depends on the borrower to pay back the loan in order to un-create the money which the bank created originally and that is why they won’t extend credit to just anyone and check your ability to service the loan etc. If you default on the loan, then the bank is required to reduce its assets by the outstanding amount. The interest that the bank charges the borrower however is not extinguished and is held by the bank as retained profits.

For most people, the biggest purchase of their lives will be the family home and so the mortgage will be the largest debt they ever undertake. The bank creates a €200,000 mortgage in a couple of seconds with a few keystrokes. Over a term of 25 years at an interest rate of 4% to 5%, you will pay somewhere between €110k and €150k in interest payments to the bank on top of the principal repayment. This means that a person on an average annual wage of €30k net will work for 4 to 5 years and hand every single cent that they earn in that time to the bank to repay interest on the money which the bank created from nothing in a matter of seconds. This is the enormous power that has been granted to the private banks which they use to exploit the population through the debt mechanism.

The whole concept of ‘investing’ for pensions on the *macro* economic scale is deeply flawed and deliberately so. It is another ‘fallacy of composition’ closely related to Keynes’ famous (and undisputed) ‘Paradox of Thrift’ – small numbers of citizens can gain from thrift, but if we all do it, the economy as a whole suffers and negates any gains overall. (Because mass ‘saving’ reduces aggregate demand spending which in turn causes reduced output of real goods and services which are the real substance of living standards.)

Pension investments compete with those of the Capital owning elites. And guess which of those factions wins… Near always, pension funds are on the losing end of the banks/financial system rigged casino.

Pension investments for the masses become yet another way for big finance to rip off the labour classes, as we see abundantly evidenced, especially when private pension provision is promoted.

Pensions should simply be provided in the same way as other benefits – out of current public revenue.

Wally

I agree with your general points, but would add that there is a reasonable place for some loan interest as aggregated compensation for ‘risk’ losses.

However, the system is so rigged that interest earnings far exceed that needed to cover the losses from citizens’ aggregate failure to repay loans, and are purely another means, by banking and Capital owner interests, of skimming off income from the labour class for no productive value in return.

Which clarification I’m sure you’d agree with?

So first you say:

“The 6 Irish banks went bust in 2008 due to their exposure to vast developer loans. ”

Then you say:

“Each time a bank issues a loan, it brings new money into existence by the simple act of pressing a computer keyboard. ”

So if the money that was loaned to developers was conjured up out of thin air, why did the banks go bust when the loans weren’t repaid?

Answer: Banks don’t create money out of thin air. They create credit out of thin air. Credit is asymmetrical. It can be created now and financed later. If a bank makes a loan, it still has to be financed with real money, just not at the same time.

Try reading something other than Village Magazine some time.

Garreth

When a loan defaults the loss transfers to the bank’s own balance sheet, and there is also the lost interest which is the bank’s profit.

Banks’ reserve ratios, if required by regulation, need only be met with some weeks delay. But the term ‘financed’ does not have the same meaning for a bank as it does for non-bank companies. (Lot’s of conveniently ambiguous terms in economics isn’t there?) Because finance, or liquidity, to make it sound better, is guaranteed to be available from the ‘lender of last resort’ – normally the Central Bank of currency issuer. Tho’ of course this function is not performed by the ECB, or any other for the EZ.

When a bank creates a loan, it also creates the balancing deposit somewhere in the banking system, unless the money is held as banknotes, which rarely happens. Thus, sufficient increase in reserves is always created, and the central bank will always provide reserves to any bank that requests, providing they have sufficient assets and capital.

In other words banks are in fact the major actors in expanding the money supply in circulation. So long as most of the money goes into productive circulation, and a (Gov sanctioned) issuer of the money makes up the difference for increased hoarding or asset bubbles, ie balances, it is sustainable. (But greed takes over..if allowed.).

Further, in US, EU and all the the major currencies, the Central Bank (or any other) does not control the money quantity, they control the interest rate. Where a ‘market’ exists for interbank transfers of reserves (not ‘finance’ by your implication) they cannot control both – quantity AND price – at the same time.

Your statement about credit vs ‘real money’ is nonsense. The monetay circulation has no means of knowing any distinction in the unit of exchange – it’s origin as ‘credit’ or otherwise. It doesn’t carry a tag as it flows around that says ‘ hey I’m credit’ or ‘ hey, I’m real money ‘.

Perhaps you should learn something about banking operations, rather than reading wherever it is you are reading Gareth?

Your conceptual flaws are mostly hiding behind the ambiguous and routinely misapplied terminology of the neoliberal paradigm. When there is such a level of ambiguity – the party with the most propaganda backing is going to win. That’s where your version sounds like it comes from – the Capital owners’ approved text.

Pension schemes are a tax efficient way of saving, with tax deferred until you draw down in it (whether that be via an annuity, ARF or otherwise). Your contributions are paid in before tax so I’m not sure how the tax burden impacts your contributions?

That said even with a very concerted effort, the average salary making significant contributions to a private pension scheme, will sadly still result in a pension that is quite measly.

But I’d rather have a measly pension of my own, topped up by what ever state pension there may be, than bury my head in the sand for my whole working life and end up with no savings/investments of my own and rely entirely on the state to support me

I would sign up to the same sentiment Ciaran, however I’ve found its not 100% practicable. My income was cut, though my mortgage hadn’t been. My ability to earn more in this job is very limited, and so is the ability for debt write down. The income I do have coming in is so heavily taxed that the actual cash in hand coupled with the rate of inflation etc means that there just isn’t the money left over to make any kind of meaningful pension arrangements. We can put money away, but it is no where near the recommended €5-10K a year. On top of that, we aren’t in a position to match the yearly increase of 3% to match inflationary pressures.

So it might pay to read a few of the comments, like mine, and realise we’d probably all like to have our own pensions without worrying about the state pension. But for some, and I suspect the majority, it is unfair to brand it as ‘our fault’ for not been able to have the pension we’d all like.

I can appreciate people going through some tough times, but I’m talking about saving for retirement over a persons whole working life. No doubt during that period of time, there will be times that are tougher than others, but I have to believe there will be periods where there is some disposable income that could be squirreled away.

Even you mention that you can put something away – albeit no where near as much as you’d like to and lower than the recommended (I never knew there was a recommended amount), and that is in a period where you are financially constrained.

If you opted to put that amount into a pension, you’d be saving almost twice that, as you wouldn’t be paying tax on it.