An Irish friend on my email list commented on my last post saying he agreed with everything I said except for my position on Ireland’s very low corporate tax rate, saying companies will leave if it is raised.
Shane can correct me if I’m off base but this is how I see the evolution of Ireland’s current economic problems. Ireland’s great boom before the recent crash was based on a combination of the mentioned low corporate tax bringing an influx of industry, an educated English speaking population and being part of the European Union so it’s products had access to a very large market. The country’s 10% tax, which some countries consider to be predatory, created an industrial boom and turned Ireland, which historically was an exporter of people, into an importer of labor.
Lots of new people needing homes and high economic growth – the Celtic Tiger - brought about the housing boom, in which, as I’ve read recently, a small house in Dublin was worth the same as a chateau in northern France. Like in America, speculation ran wild, leading to the inevitable bust.
With a more average tax rate, growth would’ve been slower providing jobs for the Irish but not creating a magnet for immigration and engendering the outsized economic boom. Ireland’s English speaking population was always going to give it an advantage in attracting American investment regardless of its tax rates. In an economic paradigm in which the highest growth is always the primary goal there will always be boom and bust. Moreover, low corporate taxes make balanced budgets impossible without placing heavy burdens on the workers.
Now we have the European Central Bank and IMF saying maybe investors in failing banks and bankrupt countries should take a loss. MAYBE! MAYBE! What a radical thought. Germany and other nations are keen for Ireland to institute severe austerity measures to get its finances together and take big loans to pay its bank’s debts. If Ireland defaults, Germany’s banks will suffer and that country will feel obligated to subsidize its banks directly instead of loaning the money to Ireland, so it’s easy to understand why it wants Ireland’s taxpayers to suffer.
Another facet of the world’s rotten banking system which is intimately aligned with mendacious government complicity has come to light in the past few days. Bernie Sanders, Independent senator from Vermont, who unabashedly refers to himself as a socialist, was instrumental in having a clause inserted into America’s recent banking reform which requires the Fed to disclose where it’s been spending its money. Ben Bernanke, Obama’s appointee to the Fed; sorry, Bush and Obama’s Fed choice, had been fiercely resisting that disclosure.
It’s not hard to understand why. The Fed printed up more than a trillion dollars ($1,000,000,000,000) to buy toxic assets from foreign banks. A German bank got nearly $300 billion, a Swiss bank around $270 billion. When it comes to saving them from their stupid decisions, the Fed will, evidently, go to the ends of the earth to find craven banksters in need.
Another couple trillion of printing press money went to American banks, Goldman Sachs by itself got $600 billion. This of course is all aside from the TARP bailout you all heard about. At the height of the banking crisis in 2008, Goldman was changed overnight from an investment bank to a retail bank (though, of course it really isn’t) in order to get free money from the US government and to protect the wealthy from their own malfeasance and greed. They’ve done so well with all that government money thrown at them, they’re making record profits and giving themselves record bonuses. Well, why not. If you’re conniving and smart enough to finagle vast sums of public money with the collusion of your government, you must deserve it. To the victor go the spoils.
To the rest go the dregs.