COVID19: Why are we now seeing fewer deaths per infection and how long will the crisis last?

I am not a scientist

I want to preface this by saying I am not a scientist and I do not propose that anyone formulates policy on the basis of what I write.

Like a lot of people, I like to understand the forces that are shaping my life. When these are complex, I like to put my thoughts down on paper. I publish them so that they might help others achieve the level of understanding they require.

The questions

There are many questions that arise from the SARS-Cov-2 virus pandemic, but perhaps the one that troubles people most is the difference in outcomes evident now compared to the first wave of the pandemic in April and May. People want to believe that the virus is less deadly. Is this actually true?

A second question that arises is how long will we have to live like this, and is it more likely that the crisis will end with the availability of a vaccine or through herd immunity.

In this context, herd immunity is the process by which a virus becomes less problematic because a large proportion of the population have developed immunity to it through being infected.

The basics of the virus and how our body deals with it

We need to understand a few important concepts before we can attempt to answer these questions.

Firstly, what happens when the virus enters your body? A virus is a submicroscopic organism capable of causing disease. It can also be referred to as a pathogen.

Basically, the virus attaches to living cells, and uses them to reproduce, compromising the function of those cells. As this process continues, and your body responds, the organs that are under attack become inflamed, inhibiting their function. This is why people die from COVID19. The small sacks in their lungs that exchange oxygen into the body become inflamed and fill with fluid, making it impossible for the patient to breathe.

The degree to which your body is affected is determined by (amongst other things) the presence of antibodies in your bloodstream. Antibodies are proteins that can attach to a virus and prevent it from attaching to living cells. Other cells then destroy the virus. As the virus gradually depletes in your bloodstream, and affected living cells are replaced, you recover (if you recover).

For antibodies to “fight” viruses, they rely on two types of living cell: B-Cells and T-Cells. B-Cells recognise the virus, and T-Cells control the process of disabling and destroying it.

A vaccine is basically a diluted does of a virus. It is strong enough to stimulate a response (the creation of antibodies) but not strong enough to cause medical problems. Getting this balance right is why it takes so long to develop vaccines.


With this basic knowledge, let’s then consider the different types of test we use in our response to the virus.

PCR Test

This tests for the presence of the actual virus itself. It is very good at finding the virus in small quantities, but it can’t tell at what stage in its life cycle the virus is at: pre-replication (less infectious), replicating (infectious), no longer replicating (less infectious). This is a swab test.

Antibody Test (Seroprevalence)

This test is for the antibodies that the body’s immune system produces to fight the virus. It tests for historical infection. This is a blood test.

Antigen Test

This tests for proteins that are produced when the virus has started replicating. It’s very good at finding people who are infectious, but not good at finding people who have the virus but who haven’t become highly infectious yet. This is a swab test.

Right now in Ireland, we test for infection using PCR tests. This is somewhat controversial, because it is not quantitative (it doesn’t tell us how infectious someone is) but is defended on the basis that it is accurate in finding the virus and is readily available, which is not the case with antibody or antigen tests.

Crucially, a PCR test is capable of returning a positive result even if the patient has the necessary antibodies (i.e. immunity) to repel the threat of the virus very quickly, or has already repelled the virus after a brief period. PCR tests will therefore find lots of “infections’, but may mislead in terms of the impact of this on health services and morbidity.

The “Safe” group and the “Not Safe” group

It is accepted that 4 out of 5 people who return a positive result from a PCR test either do not develop symptoms of the COVID19 disease or develop only very mild symptoms.

The theory (and I emphasise “theory”) behind this is that while nearly everyone has the necessary B-Cells that recognise the threat of a virus like SARS-Cov-2, only 4 from 5 people have the necessary T-Cells that can deal with it. These exist due to previous infections similar to the SARS-Cov-2 viral profile, like certain strains of the common cold. The more of these T-Cells you have, or the closer they match SARS-Cov-2, the lower the impact on you of infection.

Therefore, let’s say that the 4 from 5 people with the magic T-Cells are the “Safe” group, and everyone else is in the “Not Safe” group.

The history of the epidemic and the Infection Fatality Rate

In Ireland, by June 1st, we had recorded approx. 25,000 positive tests, and 1,640 deaths. This equates to an observed Infection Fatality Rate (IFR) of ~6%.

Between June 1st and Oct 14th, we recorded a further ~20,000 positive tests, but only another 195 deaths. In this period, the observed Infection Fatality Rate is 0.9%, a huge decrease.

Some of the decrease in the IFR between the 2 periods is undoubtedly due to the age profile of the people being infected, but this cannot explain all of it. A large part of it has to arise from the underreporting of infections in the initial period, when we were conducting only a fraction of the numbers of tests that we now carry out on a daily basis.

In fact, the scale of infection in the initial period is critical in estimating how long the crisis will continue, and if we will reach the end of it with herd immunity or a vaccine. If lots of people in the “Safe” group were infected in the initial period, we are closer to herd immunity than we think; if not, it’s more likely that a vaccine will arrive before herd immunity.

Investigating the history of the infection rate

In attempting to discover the true rate of infection in the initial period, scientists have carried out seroprevalence blood tests on samples of the population. Remember, these tests look for antibodies that have “fought” the virus. In all of the results, only very low numbers of people were found to have these antibodies, in most cases, less than 10% of the people sampled.

But is there a logic gap here? If only small numbers of people had unknown infections in the initial period, why did so many people die? And if the true IFR is really that high, why are we not seeing similar levels of death in the second period?

The accuracy of the seroprevalence test is therefore crucial.

We know that our bodies produce various types of antibodies to fight the virus, but the seroprevalence test doesn’t look for all of them. What if lots of people had repelled the virus with antibodies that the standard seroprevalence test isn’t looking for?

I am not idly speculating that current antibody tests may be unsuitable for find historical SARS-Cov2-2 infections. This issue has been discussed widely.


If this were true, and be sure that it’s an “if”, it would explain the crucial question of why fewer people are dying in the second wave of the pandemic.

The explanation here is that the IFR in the initial period is many times lower than the one we’ve observed, because there were many, many more infections than we know about or that the seroprevalence tests suggest. Some people refer to this as the “silent epidemic”.

It would also explain to some extent the likely direction of the crisis. We can say that the spread of infection in the “Safe” group in itself isn’t problematic, as these people can deal with the virus without medical assistance. What is problematic is the spread of the infection from the “Safe” group to the “Not Safe” group, as there is a higher probability that these people will need medical assistance.

However, as the number of infections in the “Not Safe” group grows, and eventually reaches a tipping point, the potential for the virus to do harm decreases. If an infection produces immunity in a person in the “Not Safe” group, they are much less likely to become re-infected or transmit the virus to others.

The tipping point if therefore vital. In the theory of herd immunity, an infection rate of 60-80% is needed before a virus becomes manageable. However, manageability increases as the infection rate increases, so a lower rate of infection would probably allow us to return to some level of normality.

We’ll know if there is any truth to this over the coming months. If positive tests continue to exponentially increase in number, but little correlation emerges in terms of the number of deaths, it’s reasonable to say that the virus is beginning to lose its battle with the “Not Safe” group. In that event, we will hopefully not have to wait for a vaccine to return to some level of normality.

The Little Drummer Girl – Plot Summary

I read this book recently and found the plot infuriately difficult to follow. I looked for a synopsis online, but was unable to find one. I therefore decided to write my own, based on carefully re-reading certain sections of the book. Note, this is filled with spoilers. Only read as far as you need to clarify your understanding of the plot. The book is well worth finishing. The finale is particularly gripping.

A bomb explodes in the suburb of Bad Godesberg in Bonn, Germany,  killing, amongst others, the child of a Israeli diplomat, who lived in the house in which the intended victim was due to stay. The diplomat survives and is able to provide information around how the bomb was planted. A suitcase was delivered to the house by a young woman, who claimed to be a friend of the diplomat’s au pair.

German police, led by Dr. Alexis, are surreptiously joined in their investigation by members of a secret unit of the Israeli security services, led by Marty Kurtz.

Through information obtained from Alexis, Kurtz believes that the bombing, and others like it, have been carried out by a terrorist cell led by a specific and highly skilled Palestinian, whose whereabouts are unknown to the Israelis. The terrorist is one of 4 brothers, 2 of whom have already been killed by the Israelis. The 4th, the youngest, is known to be in Europe. Kurtz believes that that the key to capturing the leader of the terror cell is to draw him out through his younger, less experienced brother. Kurtz mounts an operation to find the brother. He is found in Munich by a team of Kurtz’s operatives, tracked and abducted by the Israelis in Turkey en route to the Middle East.

The plot now switches to its central character, Charlie Ross, a female english actor who has previously dabbled in radical political causes. Along with a group of other actors, she is found on the Greek island of Mykonos, where the group has been asked to perform for the season by an unknown promoter (the promoter is later revealed to be the Israeli Secret Service, led by Kurtz, who need Charlie to be in Greece as part of their plan).

Charlie notices a particular man during her stay on the island. She sees him on the beach and in the local shops. She notices him because she thinks she recalls him being in the audience at several of her more recent performances back in England. She isn’t sure, but each time she sees him, she becomes more and more sure that it is the same man.

The strange man gradually works his way into the company of the Charlie’s group. His name is Joseph (his real name is Gadi Becker). He seeks out Charlie’s friendship and gains her confidence. While she retains concerns about his identity, which she does not confide to the rest of the group, she is also entranced by him. The season is ending and Joseph proposes that they travel together to visit the Greek antiquities. He instructs her on what to tell the rest of the group in order that they do not know her plans. She is still unsure, but agrees.

Around this point, the plot switches back to Kurtz, who has posed, with his assistant, Litvak, as a film producer to Charlie’s agent in London, Ned Quilley.  Kurtz understands that Quilley is in possession of detailed information regarding Charlie involvement in political causes, mainly from press clippings that Quilley’s office has collected. Kurtz convinces Quilley to allow him review the material. It later transpires that Kurtz steals the material.

Back in Greece, Charlie breaks from the rest of the group as they return to the mainland and meets Joseph as planned. Joseph brings Charlie to a view some Greek monuments later that evening. At first, everything seems to be happening as she had anticipated. She finds herself becoming more and more infatuated with Joseph.

But Joseph now changes. He becomes more distant. He drives her to remote house, refusing to engage with her questions. Members of the Israeli Secret Service unit of which Joseph is part, including Kurtz and his assistant, Litvak, are at the house. Charlie is briefly incarcerated before being brought to meet Kurtz.

Kurtz’s purpose is two-fold. He wishes to explain his purpose to Charlie and to interrogate to find out if she is the right person for the scheme he has hatched to capture his Palestinian prey.

Over the course of the interrogation, in which he uses the information stolen from Quilley, he determines that Charlie is the right person, and convinces her to join their scheme, promising her it will be the role of a lifetime as a actor and financial security when she completes the task.

The detail of  Kurtz’s plan are gradually revealed. The Israelis wish to create the impression that Charlie and the younger brother have fallen in love. His name is revealed as Michel. If the rest of the terrorist cell, and its leader, can be convinced this is true, and that Michel has joined Charlie to their cause, they anticipate that the leader will seek her out and use her in another attack, given that he has used young European women in his previous attacks. If this can be engineered by the Israelis they believe that Charlie can lead them to him.

Kurtz promises her that she can walk away whenever she wants. Joseph will also be a lead player in the scheme, and although she is angry with him, this seems to sway her. The Israelis are very aware of how elusive the leader is, and the extreme precautions he takes regarding his security. If he is to believe that his younger brother has had a relationship with Charlie, and that she is convinced of their cause, they must ensure that every detail of her story holds up.

To be certain this is the case, Joseph will act as Michel, travelling with Charlie through Greece, acting as both Michel and Joseph as required. Joseph and Charlie depart from the house and spend their first night together. Joseph takes great care to educate Charlie in every detail of her relationship with Michel.

The plot now re-introduces Michel. He is held captive by the Israelis, and through a series of ruses, they manage to get him to reveal significant information about his past, his family and his activities. The Israelis also forge several letters to and from him, which provides even more information. This is all part of the scheme to convince the cell that is relationship with Charlie is real. It later transpires that Michel also reveals a plan to transport a car full of explosives from Turkey into Germany via Austria. This was the purpose of the trip on which he was abducted.

Joseph and Charlie continue their journey through Greece. He recounts to her how their relationship developed (which is why he was in the audience at her performances in England), including the revelation that he is a member of a Palestinian terror cell. The relationship becomes more intense. He tells her of his family, and his brother Khalil, and his admiration for him. He shows her his gun, and asks her to venerate it.

Finally, as per the plan revealed by Michel during his interrogation, he asks her if she will drive a car full of explosives, the same car that Michel was driving when he was abducted in Turkey, from Greece to Austria. The explosives are real. Charlie is unsure, but Joseph, acting as Michel, convinces her. Charlie is becoming confused about whether or not her infatuation is for Joseph or Michel. She drives the car as required and leaves it at the train station in a small Austrian village, where it is collected by members of the cell. The collection is observed by the Israelis, who are now able to identify the members of the cell who scouted the location and made the collection. This confirms to them that the plan is working. Charlie is re-united with Joseph. Joseph continues to play the part of Michel, instructing Charlie in the detail of their relationship.

Thus far, everything is going to plan in Kurtz’s scheme. The next part of the plot is particularly intricate. It has always been Kurtz’s intention to kill Michel. Michel is the only person who can deny that the relationship with Charlie existed, so he must be removed. However, the manner of his death must be known to the rest of the cell, so that it fits with Charlie having driven the car from Greece to Austria.

Kurtz meets with Dr. Alexis, who has been demoted from his former duties. Anticipating that Alexis will seize an opportunity to regain his reputation, Kurtz offers him information about the original Bad Godesberg bombing, which Kurtz obtained during the interrogation of Michel. He does this to convince Alexis of the quality of his information. He then tells Alexis about the explosives that are due to arrive from Austria. Kurtz relays this information to his superiors. Kurtz’s intent here is to ensure that the detail of Michel’s death are known.

Before Michel is killed, Charlie must see him. Charlie is brought to where Michel is held captive. He is paraded before her, naked, to ensure she knows the features of his body. Michel’s health is not good at this point. The experience disturbs Charlie. She feels more and more attached to Michel, as if he were a real lover. She now returns to England to await contact from the terrorist cell. Charlie does not know that Michel will soon be executed.

Kurtz now progresses with the next step of the plan and arranges Michel’s death. Michel and the girl who collected the explosives in Austria and placed in the car that contains the explosives. The car is driven along the motorway in Germany and the explosives detonated remotely by the Israelis. The event is presented as an accident in which explosives been transported by 2 terrorists detonate prematurely. One of the terrorists is known to be Michel, which is corroborated by the information passed by Alexis. The link is now established between Charlie and Michel. She must have been his lover if she had assisted in such a dangerous mission.

The Israelis anticipate that the cell will now make contact with Charlie. They know that she was Michel’s lover and that she helped bring the explosives to Germany. They must therefore be convinced that she supports their cause, and given their need for European women to stage their bomb attacks, it is logical they will seek her out to recruit her into the cell.

Contact is eventually made by a man and woman. The woman is Helga, who will become Charlie’s handler as she is inducted into the cell. Charlie is being shadowed by members of Kurtz’s team during her contacts with Helga, who now know the identities of several members of the cell. They instruct her in how she should act and what she should say. Charlie’s infatuation with Michel becomes more real and intense. When she learns of Michel’s death from Helga, she is deeply moved. It becomes less clear if Charlie is still part of the scheme of if she is actually beginning to sympathise with members of the cell.

Helga is uncertain about Charlie’s bona fides, but becomes gradually convinced, in no small part due to the obvious intensity of Charlie’s feeling for Michel. She has also seen letters sent between Michel and Charlie, all of which were forged by the Israelis. Helga arranges for Charlie to be transferred to Lebanon, where she will be trained as a cell member. Before Charlie leaves, she spends the night with Joseph, during which he finally submits to his feelings for her.

In Lebanon, Charlie’s meets with friends and family of Khalil and Michel. She is installed in a refugee camp and taught about firearms and explosives. Her sympathies now seem to firmly lie with the Palestinians. She passes a number of tests to establish her loyalty and resolve.

Meanwhile, by shadowing the members of the cell that are now known to them, Kurtz and his team have determined that the next attack will be in Freiberg in Germany, on a visiting Israeli academic, Dr. Minkel, who is due to give a lecture. They also establish that the cell intend to use Charlie to deliver the bomb.

Charlie is recalled to Europe to take part in the attack. She is re-united with Helga, who briefs her on the mission. Helga informs Charlie’s that she will meet Khalil to collect the bomb (it later transpires that Khalil insists on making each bomb himself). Some of the Israelis are concerned that Charlie has been turned. Joseph assures them that this is not the case.

On the night of the attack, she meets Khalil in a remote hotel. They talk while he prepares the bomb. He tests her on her relationship with Michel and he appears convinced. Charlie brings the bomb to the hall where the lecture will take place. The bomb is in a briefcase that has apparently been mislaid by Dr. Minkel. Charlie engineers its return to him. When she reaches the room where Dr. Minkel is preparing for his lecture, she finds the Israeli Secret Service team, including Kurtz and Joseph, waiting for her. The take the bomb from her and make it safe. Joseph insists she enacts the entire scene as planned. As she leaves, he gives her a homing device, knowing that she will be returned to Khalil, who will now trust her implicitly.

After she has left, the Israelis carry out a controlled detonation of the bomb.. News reports are issued to say that Dr. Minkel has been killed in the attack (he hasn’t, however).

Charlie is returned to Khalil, who congratulates her and now appears more at ease in her company. They spend the night together and make love. In the morning, Khalil becomes suspicious that there is no agricultural activity in the fields around the house where they are staying. He becomes more suspicious when she tries to reassure him. He becomes aware of the homing device and switches it off. Charlie’s admits her duplicity, but before Khalil can do anything, Joseph, who was alerted when the homing beacon stopped, bursts through the door and shoots Khalil dead.

Over the next few weeks, the Israelis close off the loose ends that may have betrayed their plan. Charlie suffers a nervous breakdown and receives treatment. She is eventually reunited with Joseph.

A response to Rory Gillen’s views on Bitcoin

Over recent weeks months, several high profile figures in the banking and finance world have taken time out to comment on Bitcoin. Their message has been singular: Bitcoin is worthless and its recent rise is value is a speculative bubble.

There has been lots of commentary from the Bitcoin community challenging this view, which can be reviewed elsewhere. I’m going to specifically address the views raised by Rory Gillen, of the Irish investment company, Gillen Markets. Rory published an article in August this year in which he elucidated his understanding of Bitcoin, and why it isn’t “sound money”. The article can be view here. I going to quote it and respond to each quote in turn.

“ understanding of what constitutes ‘Sound Money’ is more important here than any understanding of technology in trying to determine whether bitcoins are a currency, an asset or a mirage.”

Let’s be clear. The technology behind Bitcoin is absolutely central to its value, and an understanding of the technology is just as important as understanding “sound money”. Why? Because it is the technology that creates the features of Bitcoin that make it more appealing to people than fiat currency. It is the technology that allows Bitcoin to be used without Counter Party Risk (your bank losing your deposits); it is the technology that makes Bitcoin secure; it is the technology that limits the supply of Bitcoin; it is the technology that allows Bitcoin transactions remain more anonymous that banking transactions; it is the technology that allows Bitcoin to be used economically for micro-payments. To suggest that Bitcoin is just a more technologically advanced version of fiat demonstrates an immediate misunderstanding of Bitcoin’s appeal and potential.

“Paper money and credit facilitates trade, and,  to be accepted as payment, each must be trusted and have intrinsic value.”

This is incorrect. The US dollar has no intrinsic value, but is the world’s reserve currency. To be accepted as payment, a currency must retain only characteristic, which as Rory points out, is trust. More about this later.

The next couple of paragraphs in Rory’s piece make no sense to me. He tells us that the Government’s ability to raise taxes underpins Central Banks, who in turn underpin bank deposits, and that bank deposits are therefore “Sound Money”.


“…as paper money can be created at will,  not all paper currencies have  acted as a store of value – think of the German Reichsmark after WW1 and, more recently, the Argentinian peso and the Zimbabwean dollar – all worthless as a store of value due to the fact that their governments spent recklessly and printed money in huge quantities to try and pay for that spending.”

So, no, the fact that Governments can raise taxes is quite obviously not a guarantee that bank deposits are “Sound Money”.

Having left the question reliability of fiat currency hanging, Rory moves on to Gold.

“When you accept gold in settlement of a trade you have an asset whose value is not dependent on a third party…Gold is an excellent store of value, but it has never been an ideal medium of exchange.”

Correct, and correct, and now on to Bitcoin.

“Bitcoins are earned by those who verify transactions using blockchain technology over the Internet, so that one could suggest that a base intrinsic value for a bitcoin is the value of  the programmer’s time.”

No, Bitcoin, like every other currency, has no intrinsic value. Also, Bitcoin is not generated by programmers. It is generated by computer processors solving math problems. That’s not really relevant, but let’s be accurate.

“Fans of bitcoins seem to be placing all their faith in the strictly limited supply.”

Firstly, the word “Fans” suggest that adopters, supporters and users of Bitcoin are aren’t really well enough versed in the minutiae of finance and economics to be taken seriously. On the contrary, the community of people across the world who manage the development of Bitcoin, who promote Bitcoin and who use Bitcoin retain a depth of economic, technical and social experience that would be difficult to match is any commercial bank of state department of finance.

Secondly, these ‘fans” are not placing all their faith in the limited supply of Bitcoin. Instead, Bitcoin users place their faith in Bitcoin because they foresee a time when ordinary people will no longer trust fiat currencies, and that in searching for an alternative, they will have regard to a variety of factors. Limited supply will be one of those, but not the only one. Of equal importance will be separation of the currency from the banking system, durability, security, portability, divisibility and perhaps most importantly, stability. Bitcoin ticks all those boxes bar one: stability. But stability is something that requires time, and Bitcoin is still less than 10 years old.

Rory now moves on the the subject most favored by Bitcoin detractors: its use in the criminal underworld:

“Given the abundance of illegal trade and the increasing volumes of it over the Internet there is a natural demand for transacting in a currency that has no trail….For crimes more readily targetted (sic) by law enforcement such as drug sales, the dark web and bitcoin provide an irresistable (sic) combination.”

Firstly, it is not true that Bitcoin transactions leave no trail. Transactions in the Bitcoin Public Ledger (the Blockchain) are recorded as cryptographic strings, rather than bank account numbers that can be readily traced to a person. But that does not mean that transactions are untraceable. The use of a private key in the Blockchain can be traced to the point where it transacts against a known entity, at which point the owner of the key can be revealed. This is not a simple process, but it can be done, and has been done to reveal high value criminal operations. The point is that this type of audit is only attempted in very serious cases, and is not worthwhile for the vast majority of transactions, which is why the average user of Bitcoin can be confident that their transactions are effectively anonymous.

Secondly, the use of Bitcoin in the criminal underworld is vastly overplayed, and represents a tiny, tiny fraction of the value of criminal transactions transacted using cash, the legitimacy of which is never questioned. Moreover, all mainstream Bitcoin exchanges, which must be used to convert Bitcoin to fiat currency, must observe anti-money laundering regulations, so relying on Bitcoin to underpin criminal activity is just as risky as using cash.

“If this is the attraction of bitcoins, then surely authorities will move to clamp down on such trade if or when the problem becomes big enough. Even if authorities are behind the curve, anonymity doesn’t quite explain why the supply of bitcoins has to be limited.”

OK, so criminality isn’t the attraction of Bitcoin, but an interesting question is raised here. Can authorities actually clamp down on Bitcoin? The answer isn’t straight-forward. It is certainly the case that authorities can’t clamp down on Bitcoin itself (other than by shutting down the Internet), as Bitcoin does not rely on any aspect of the State to exist.

However, authorities can clamp down on interactions between Bitcoin and the current banking system, which is controlled by the State. This manifests itself in authorities preventing banks dealing with Bitcoin exchanges, which means Bitcoin holders cannot convert their Bitcoin to fiat currency. This exists as an option only for as long as people want to convert Bitcoin to fiat currency, which they will not want to do forever, as their range of goods and services they can purchase with Bitcoin continues to expand.

So why have the authorities not done so already, if the window for doing so is gradually closing? There are various theories in play here.

Some believe the State is simply being complacent, albeit that authorities in China and New York have already regulated Bitcoin exchanges out of existence.

Others suggest that the authorities want to keep Bitcoin in the open, where it can be monitored, rather than forcing it underground where the technological community will put it beyond the reach of the State forever.

 Others suggest that clamping down on Bitcoin will stifle FinTech innovation, allowing banks to maintain their highly-profitable control over the monetary system, which is perennially unpopular.

Most likely, its a combination of all these things.

But back to Rory, who now broaches the question of the Bitcoin “bubble”.

“…we are simply witnessing a speculative development where the limited supply of bitcoins is leading to higher prices as the demand to own them multiplies, with these higher prices bringing in more speculators who drive the price still higher.  “

This is simplistic, and demonstrates a limited understanding of the wider philosophical nature of Bitcoin. 

Let me state clearly that most Bitcoin users believe that the value of Bitcoin at any time contains a speculative element, and that when Bitcoin experiences a surge in value, this is almost entirely explained by speculation.

 Where Bitcoin detractors go wrong is in believing that Bitcoin will ultimately fail because a portion of its value derives from speculation. The logic of this is difficult to fathom. All assets classes, including currencies, experience surges and falls in value. Real estate is probably the best example. Property price bubbles happen at least once per generation, but has anyone ever suggested that real estate will one day cease to have value?

But people will claim that Bitcoin’s surges and falls in value are far more dramatic than regular asset classes, and currencies in particular, making it unreliable as a means of exchange. This is true, but lets remember some other things. Bitcoin is less than 10 years old. Its still virgin territory, so fluctuations in value will be more frequent and pronounced. Moreover, Bitcoin’s total market capitalization is infintesimately small compared to fiat currencies, so the impact of larger transactions is greatly amplified in setting the spot price of Bitcoin. Again, these things will change as Bitcoin adoption continues to grow.

But does this address the question posed? Is Bitcoin a bubble?

The most straight-forward answer to this is as follows:

At any given time, the price of Bitcoin will be inflated by speculation, but as time passes, Bitcoin will arrive at a value that does not rise of fall any more rapidly than other Tier 1 currencies.

What that value is is unknown. It will either be very small, if Bitcoin retreats from whence it came, and is only held and used by a relatively small number of die-hard apostles, or very, very great, if Bitcoin continues on its current trajectory as an long term alternative to fiat currency.

“If bitcoin is a novel way to settle trades outside the banking system, then why limit the supply? If the supply is increased, as we think inevitable (there’ll be no shortage of new digital currencies), then the prices will fall to their intrinsic value, which in bitcoin’s case is far below today’s price.”

There are a few parts to this. The ability of Governments to increase the supply of Bitcoin to address political problems is regarded by Bitcoin users as a central flaw in fiat currency, so it obviously isn’t a feature of Bitcoin. Regarding the increase in supply that Rory thinks is inevitable, I am again struggling with the logic. There are multiple cryptocurrencies, but the supply of one does not impact the value of another, any more than the supply of the Danish Krona impacts on the value of the US Dollar. The value of any individual currency depends on the trust place in that currency, which is impacted by the amount of that currency in circulation, which is not impacted by the amount of any other currency in circulation.

The final quote from Rory’s piece is this: 

“If we have misunderstood the bitcoin revolution we stand ready to change our view.”

Let me try and explain the Bitcoin revolution as succinctly as possible.

Belief in Bitcoin does not stem from blind faith in Bitcoin’s features. In fact, Bitcoin has many flaws. Instead, belief in Bitcoin stems from an understanding that the current monetary system of politically-controlled, derivative-spawning and infinitely supplied fiat currency is unsustainable.

The 2008 financial crisis revealed just how vulnerable this system is. The crisis required the guarantors of the current system to deploy solutions that were previously unthinkable; solutions that can really only be deployed once, meaning that their armoury is virtually empty if they are required to deal with a similar crisis in the short to medium term.

If that understanding exists, it follows that Bitcoin users foresee a point in time when the current monetary system will face an existential crisis. If there is another shock to the system, will democratically controlled governments be allowed to bailout of the banks again? And if they are not, what alternatives are left other than to inflate the supply of currency, given that this is the most immediate and politically pain free solution to any deflationary crisis? This was the solution that many commentators proposed to the last crisis, and was used indirectly in the form of quantitive easing. If the next crisis presents a choice between deeper easing, and the lethal cocktail of bank bailouts and austerity, its difficult to see any Government opting for the latter.

So what happens then? Lets go back to that word “trust”. As ordinary people see their spending power, and the value of their savings, gradually began to erode, they will inevitable began to question their trust in the paper currency in their pockets. In the past, a retreat in trust was always stemmed by the absence of a workable alternative (they weren’t going to do their grocery shopping with gold). In the future, that will not be the case. There will be an alternative, that retains the “store of value” characteristics of gold, and the transact-ability of fiat currency.

In such circumstances, why would Bitcoin not prosper?

Lancing the Brexit boil

The nicest picture of a boil I could find...

The nicest picture of a boil I could find…

There are 7 days to go before UK citizens vote on whether or not to leave the EU, and its becoming increasingly more likely that they will choose to leave.

On a purely logical level, this is difficult to understand.

For instance, the UK economy has prospered since the joining the EU. In 1973, when the UK joined, its GDP per capita was lower than that of Germany, France and Italy. Today it is higher than all 3.

Beyond economics, the UK’s system of democracy is archaic compared to that of the EU. Not only does the UK have an unelected Head of State (the Queen) and an unelected upper house of parliament (the House of Lords), kamagra uk, but its system of electoral democracy does not produce representative parliaments.

For instance, in the 2015 General Election, UKIP obtained 12% of the vote but only 1 seat out of 650 in parliament. By comparison, UKIP won 24% of the vote of the European Parliament election in 2014, and won 24 of the 73 seats allocated to the UK in the European Parliament.

A lot of the momentum behind the move towards leaving the EU appears to arise from immigration, but even in this, there is no logic.

There are approximately 3m EU nationals living in the UK who were not born in the UK.�If they were all to leave, and all the UK residents living in other EU countries were to return home, the population of the UK would decrease by about 2m people, or 3%. At current natural population growth levels (ie excluding net migration) that decrease will be made up in under 10 years. The only difference would be that the UK would have increased its number of pensioners and reduced its number of people working and paying tax (dramatically).

Clearly then, there is some other more emotional force at work that is pushing people away from the EU. Commentators frequently lay the blame for this at the door of the EU itself. This is an easy argument to make. The EU is a form of government, but because it doesn’t look and feel like the national governments that we are all used to, its simple to make the argument that its “undemocratic” or “corrupt”.

Its much harder to explain that while the EU is a form of government, it is not a nation state, and the fact that its institutions are not exact replicas of national institutions reflects that. For instance, the EU parliament �has fewer powers than national parliaments because the EU parliament is not supposed to replace national parliaments, and the EU Commission is the only institution that can propose legislation as the EU Commission is the only institution that can place the needs of the Union itself over and above the needs of individual member states.

Its also easy to refer to the “EU” when in fact what we are talking about are member states. For instance, in dealing with the Greek debt crisis, or the refugee crisis, collective decisions were and are being made by national governments, not by any EU institution. The institutions of the EU merely facilitate the negotiate and implement the ultimate decision.

In reality, dissatisfaction with the EU is really just dissatisfaction with politics in general. For many people, politics is about well-paid, far away people making decisions that always seem to involve someone being pissed off. However, we tolerate it because we understand the alternative is chaos.

In the case of the EU, the alternative isn’t chaos, its returning to the way we did things before the EU, the good times, where we only remember all the good stuff and all the bad stuff has been removed from our memories behind a screen of nostalgia.

That’s the essential difference with the EU. We regard it as an optional extra, something that we’re not sure we need, and who many people think we don’t need, compared to national democracy, which we wouldn’t dream of being without, even when we regard it with searing contempt.

In this regard, its difficult to see how the EU can prosper. Politicians talk about reforming this, and changing that, and listening to the people, but in reality, for as long as the EU is something that is separate to national politics, it will always be an easy scapegoat for problems created by national politics that national politics can’t solve.

Perhaps, therefore, the alternative to the EU needs to be put to the test. What if one member state decides that they are going to step into the time machine, and return to the 1970s, when George and Mildred was on the TV, when Liverpool used to win the European Cup, and you could buy Duty Free cigarettes on your way back from your holidays, and you could leave your keys in the car outside the house and you had a job for life in British Leyland?

It might all work out. They might get on fine. It might not. They could disappear into a hole in the North Atlantic. But at least we’d know. At least we’d have something to point to and say: “Look, this is what happens when you go with the alternative.”

I see this as an inevitable and logical step in the evolution of not only the EU, but international co-operation and governance. We can’t allow the EU to die by a thousand cuts, or to be taken over by people whose only interest is in its destruction.

Let’s allow the boil to be lanced, to see how much puss it spews. If we are better served by retreating into our nation states and looking out at each other over fences and walls, then so be it. I don’t think we will be, but I’d sooner know for sure.

Have we given €200bn to the EU as part of our membership of the Common Fisheries Policy?

Extraordinary claims persist

Extraordinary claims persist

Political discussions about the overall merits of Ireland’s membership of the EU invariably make reference to our participation in the Common Fisheries Policy (CFP), and the value to the rest of the EU of the fish stocks extracted the Irish Economic Exclusion Zone (EEZ), which is a 200m limit around the Irish coast in which Ireland claims exclusive fishing rights.

Calculating the value of this catch, and the value foregone by the Irish fleet and industry in sharing fishing rights in the EEZ with the rest of the EU is obviously a mammoth statistical task, but this hasn’t deterred various commentators from presenting their own “back of an envelope” calculations as hard and cold fact.

Foremost of these is a claim by journalist Tom Prendiville, who published an article in Daily Ireland (and later Magil) in 2006 entitled “STATISTICS BLOW MYTH OF IRELAND AS EU BENEFICIARY”. This derived a figure of €200bn for the “contribution” made by Ireland to the EU in permitting accessing to the EEZ. The article doesn’t reference any particular year for the value of the €200bn, so we can only presume it refers to 2006.

Prendiville’s “work” has been referenced numerous times since. Various candidates contesting election to the European Parliament has used it to support their position that Ireland is being hard done by by EU membership. In 2014, Luke Flanagan used the claim as a central plank of his campaign. He was elected to the European Parliament with a massive share of the first preference vote.

The claim has also surfaced in academia. In 2012, a lecturer in Lecturer in International Relations at Dublin City University, Dr. Karen Devine, re-surfaced the claim in a presentation to a joint Oireachtas committee re. the ratification of the Fiscal Treaty. She presented her analysis to the committee, which comprised an extrapolation of the value of the entire catch from 1975 to 2010 from on a single reference year (2008). From this, she arrived at a total value for the catch of €67bn (again, without reference to point in time value), and then added another €134bn on to this to account for added value in processing and marketing (67bn + 134bn ~= €200bn). Her analysis runs to a total of 4 pages, the bulk of which comprises screen shots of MS Excel spreadsheets from her computer. You can download it here. Dr. Devine is repeating the claim in her current campaign to be elected to Seanad Eireann.

To anyone with even the most basic knowledge of economic statistics, extrapolating information in this fashion is obviously flawed. In fact, its remarkable that a professional academic would add their name to what is such obvious chicanery.

In attempting to derive a more accurate value, most serious research refers to the Sea Around Us Project which is based in the University of British Columbia. The project is an international research initiative that assesses the impact of fisheries on the marine ecosystems of the world based on fisheries related data at spatial scales. The project has collected data on fisheries throughout the world going back as far as 1950. Data in relation to the Irish EEZ is available on their website.

This link shows the values of all stock landed from the Irish EEZ at 2005 US Dollar prices. There is a link in the top right of the screen to download a CSV file of the data used to compile the chart. This CSV file includes approx. 22k rows of data, one each for each type of fish landed by each country in each year. If this data is opened in an Excel spreadsheet, it shows that the total value of the catch from the Irish EEZ between 1950 and 2010 is approx. $26bn in 2005 prices. The value of the stock extracted between 1950 and 1973, when Ireland was not a member of the EU or the CFP, is approx. €7bn, which means the value of the catch between 1973 and 2010 is approx $19bn (approx. €15bn), a fraction of the value claimed by the “back of the envelope” commentators mentioned above.

Moreover, as the chart in the link above shows, the Irish fleet extracted a large part of that value, ranging from approx. 10% in previous decades to up to 60% at peak levels (1995).

There are other considerations which must also be included in this analysis. To claim that Ireland has made a “contribution” to the EU by providing access to the EEZ presumes that prior to joining the EU and CFP, Ireland had exclusive access to the EEZ. This was not the case.

Up to 1976, Ireland laid claim to fishing rights in only 12m of territorial waters, not the 200m that currently defines the EEZ. The wider EEZ was heavily fished by French, Spanish and Russian fleets. The Irish fishing fleet did not have the capability to exploit fishing stocks in the wider area (it barely had the capability to exploit the 12m area), nor the naval resources to patrol and exclude other fishing fleets from it. In fact, the decision to create EEZ was only taken on foot of membership of the CFP, which provided funding for both the expansion of the fishing fleet and landing facilities, and the naval patrol vessels required to police the EEZ (the EU paid for all 4 naval patrol vessels which have been deployed in the EEZ in the intervening period, the LÉ Deirdre, the Emer, the Aoife and the Aisling).

Crucially, since the creation of the EEZ in 1976, the Irish fleet extracts significantly more stock from this area that was the case prior to 1973, while the fleets who previously fished this area with impunity extract significantly less. Based on this, its credible to argue that the Irish fishing fleet has actually benefited from membership of the CFP rather than having foregone benefit, as argued by others.

Claims in relation to added value from processing and marketing also require scrutiny. To include this figure in deriving overall value involves a number of extremely tenuous assumptions. Firstly, it presumes that the “rule of thumb” in adding €2 in processing value to every €1 in landed catch value is accurate both across 28 countries and 35 years, an assumption that would fail even the most rudimentary statistical test. Secondly, in presumes that capital invested in fishing assets and infrastructure by other EU states would not have produced similar value if invested elsewhere. Thirdly, it presumes that if Ireland had not joined the CFP, that we would have expanded our fishing and naval capacity in the period post 1973 to exclusively fish the EEZ to the same extent as the combined fishing fleets of all other EU fishing nations. These assumptions are obviously ridiculous.

As noted earlier, deriving an overall value for the value to the EU of Ireland’s participation in the CFP is extremely difficult. Generally speaking, when all factors are considered, serious research agrees we have made some contribution, but that contribution isn’t anywhere near the value of €200bn frequently touted by people who are skeptical about our involvement in the EU.

The people who have the most interest in our involvement in the CFP, our fisherman, are quite clear that the value foregone is fishing stocks marginal and that Ireland has benefited significantly from CFP investment in our indigenous industry, access to British fishing zones and the extension of the EEZ.

In the article referenced below from 2009, Sean O’Donoghue of the Killybegs Fishermen’s Organisation, which is the largest representation organsiation for fishermen in the country, said in reference to the €200bn claim:

“I have researched it, and those figures should have been challenged long ago.”

Pensions shouldn’t be an easy target

In the general cut and thrust of politics and the formulation of public policy, it is generally accepted that proposing any measure that impacts on the living standards of old age pensioners is an act of political suicide.

It is therefore ironic that changes to how pensions are accrued and taxed are rarely controversial.

For instance, the current Government introduced a private pension levy in 2014 which skimmed 0.15% off the value of private pensions funds. This was withdrawn after 2 years, but still represented a system of double taxation that only applied to the holders of private pensions funds. The move did provoke a certain backlash, but many commentators welcomed it, and there was none of the outrage that followed the withdrawal of the medical card for all over-70s, millionaires and paupers alike.

The reason for this seems to stem from a mistaken view of what private pensions are. The system under which a taxpayer is allowed to deduct their pension contribution from their income before that income is subjected to the calculation of PAYE is referred to has a “relief”, as if the State is cutting the taxpayer some slack for saving for their retirement. Indeed, arguments in favour of this measure and frequently framed in the context of rewarding and incentivising people to save for the future.

This view of private pensions is also promoted by frequent media references to the pension arrangements of senior private and public sector executives, as if to suggest that the only people who have private pensions are people who are already well-heeled and not in need of any more “relief” from the State.

This understanding of private pensions if mistaken, and in promoting it, the media is doing no favours to large sections of middle and low income earners.

Firstly, not having to pay PAYE on your pension contribution is not a “relief”. If you make a pension contribution, you don’t pay tax on that income in the current year because you are deferring that income until after your retirement, when you will pay tax on it. The State isn’t doing you any favours here. You’re just making an agreement with the State to defer your income and its associated tax liability to a later time. If you weren’t allowed make the deduction, you’d be paying tax on the same income twice: once in the current year and once when you draw down your pension.

Secondly, private pensions are not the sole reserve of the elite. Figures regarding how many people working in the Irish economy have pensions vary, but none put the figure at below 50%. A recent Friends First survey put the figure at 67%.

This level of engagement brings some of the proposals of the political parties contesting the General Election into sharp relief.

Several parties are proposing converting the Universal Social Charge, which was designed as an emergency measure, into a permanent feature of the taxation system.

Unlike PAYE (income tax), USC is charged on all your earnings, including any income you decide to defer until after your retirement (your pension contribution), and for retired people, any income they receive from private pensions. If the USC were a temporary measure, this would be logical, as you wouldn’t be paying it a second time further down the road when you draw down your pension, and if you’re a pensioner, you wouldn’t have paid it when you were building your pension: ie, everybody is paying it only once.

However, if the USC is to be made permanent, and continues to be chargeable on both all your income in the current year and income from private pensions, everybody who has a private pension will be paying it twice: once in the current year and once when you draw down your pension.

None of the parties proposing retention of the USC have addressed this anomaly, again reflecting the general view that private pensions are a “privilege” and therefore a soft target for rhetoric driven policy.

If the USC anomaly were not bad enough, one party is going even further.

Sinn Fein is proposing to standardise the tax “relief” given for private pension contributions. This is a somewhat obscure concept that doesn’t register easily, but it involves a significant drain on income for anyone earning more than €33,800 per annum (where the higher rate of income tax kicks in) who is making a contribution to a private pension.

Currently, if someone earns €36,000 per annum and makes a pension contribution of €1,000, their PAYE calculation begins at €35,000, not €36,000.

They then pay tax of 20% on €33,800 and 40% tax on the remaining €1,200. They don’t pay 40% tax on the €1,000 they used to contribute to their pension, which is income they deferred to pay tax on at a later time. As such, their tax liability is reduced *in the current year* by €400.

Sinn Fein has positioned this as a “gift” from the State to the taxpayer, and want to claw it back. What they propose is that the person in question pays tax of 20% on €33,800 and 40% on the remaining €2,200, without making any allowance for the income deferred to a later time.

Instead, they will give the taxpayer a refund of 20% of the pension contribution, which in this case will be €200. This represents an increase in income tax for that person of €200 per year (which is greater than their annual liability for water charges).

What is particularly unfair about this proposal is that it means 2 people with the same net income in a given tax year will pay differing amounts of tax depending on whether or not they have made a pension contribution.

Someone who earns €35,000 and doesn’t make a pension contribution will pay €200 less tax than someone who earns €36,000 and makes a pension contribution of €1,000, even though the person making the contribution will pay tax on the €1,000 they have deferred when they draw it down.

It also means that the minimum rate of tax on income on many pensions would be 40%, even if the total income from that pension is less that than €33,800 (the standard rate cut off point). Pensioners who earn more than €33,800 from their pension could be paying as much as 60% tax, depending on how their pension fund was accrued.

The intricacies of the tax system don’t often emerge in the heat of a general election campaign, but on this occasion, they probably should.

10 reasons why Sortition is better than Elections

A lottery instead of a ballot?

A lottery instead of a ballot?

Sortition is the process of choosing public representative by lottery rather than by ballot.

While sortition might seems like a strange way to choose the people who govern us, it actually makes a lot of sense.

1. Election promises

Because elections are a popularity contest, getting elected means making promises, most of which are discarded after the candidate and their party is elected. This is hugely frustrating for voters, and undermines the credibility of the political system.

In Sortition, no promises are required, as every candidate has the same chance of being elected as every other candidate.

2. Political parties

Political parties are an essential feature of any democratic system based on elections. To provide the electorate with relevant choices, politicians need to be organised in groups that can campaign during the electoral campaign. This organisation is also required in the parliament, when one group of politicians governs and another provides opposition to whatever the group of governing politicians do and says. Parliamentary organisation is also needed to ensure that individual parliamentarians act in line with party policy, rather than according to their own views or beliefs, to underpin the stability of the sitting government.

There are certain advantages to this, but political parties are also breeding grounds for corruption. Membership of a party provides a conduit to those other members who govern, and decisions taken in this regard are invisible to the general public.

In Sortition, there is no need for such organisation. There are no elections, so no organisation around that activity is required. In parliament, members are free to vote how they choose, as they consequences of a vote being defeated does not undermine the Government, as the Government is chosen from all members of the parliament, rather than the political party with the most seats.

3. Corruption

No political system can guarantee against corruption. If an individual is given power, there will always be another individual willing to pay them to use that power by proxy.

Democracy based on elections is particularly prone to corruption, because money is almost essential to political success. Democracy also encourages corrupt people to seek election, because success can be achieved with money. Democracy allows people who want power most to obtain power, when in fact those are the people who should never be in power.

A public representative who obtains power via a lottery system would still be exposed to corrupt influence, but the incentive to be corrupt is greatly reduced. Money confers no advantage on public representatives appointed via Sortition, so there is nothing to be gained politically from taking money to act in a particular way.

4. Fairer and more diverse representation

Because of the nature of electoral politics, the people who are elected tend to come from a restricted subset of demographics, income brackets and professions.

Wealthier people tend to fair better. People who have been involved in trade unions tend to fair better. People in professional occupations (solicitors, doctors, accountants) tend to fair better. Teachers (who have time off during election campaigns) tend to fair better.

Conversely, mothers tend not to participate. People from low-income backgrounds tend not to participate. People in 9-to-5 jobs tend not to participate. Farmers tend not to participate. In fact, a huge portion of the average population is generally excluded from representation.

In Sortition, none of this true. Anyone who wants to can add their name to the list of eligible candidates. No campaigning or money is required, and mothers, people on low incomes, 9-to-5ers and farmers are just as likely to be made members of parliament as anybody else.

5. Clientelism

Clientelism describes the phenomenon where elected public representatives act as advocates for their constituents who are faced with personal issues. This is a particular problem in multi-seat constituencies, where each politician competes with every other politician to see who can provide the best “service”.

This is not why we elect public representatives. We elect public representatives to consider evidence pertaining to national issues and make decisions based on that evidence. The ability of a public representative to do this effectively is greatly curtailed if they have spend half their time in their local area dealing with issues that should be dealt with by local agencies.

In Sortition, this problem doesn’t exist. The is no competition, so public representatives can focus entirely on national issues.

6. Electoral fraud / manipulation

In a democratic system based on elections, significant resources have to be deployed to protect against fraud. Agencies have to be established to monitor spending, to ensure balance in the media, to ensure that polling stations are secure, to ensure that votes are counted correctly, to ensure that the electoral register is valid and accurate, to ensure that only people who are entitled to vote can vote. This costs a lot of money, and fraud and manipulation still occur.

In Sortition, the system is simple. People who want to be considered put their name on a list. All the names go into a “hat”, and a fixed number are drawn. The process takes no more than an hour, and once it is done in public, is virtually incorruptible.

7. Universal participation in the legislative process

In typical democratic systems based on elections, legislation is drafted by the government and passed by a majority of the government representatives in the parliament. Members of the parliament who are not members of the governing party suggest changes to the legislation, some sensible, some just to get their name in the papers, but these changes are almost universally ignored, as conceding to such changes is seen as an admission by the government party that the other parties have sensible things to say, which is then used by those parties when the next election comes around.

This means that a very large number of public representatives in a parliament have no input into legislation for the 4 to 5 years they spend in the parliament.

This isn’t a feature of Sortition. There is no government party, and no elections, so public representatives who put forward legislation can accept changes and improvement to legislation without having to worry about how this makes them look or how it impact on their electoral prospects.

8. Political geography

In order for voters to feel like their local areas are getting a fair deal in the distribution of resources, decisions around public spending are often made on the basis of electoral impact rather than actual need. This leads to systems that are disjointed and poorly planned, in which valuable resources are wasted.

In Sortition, there are no elections, so public representatives can consider decisions entirely on what matters, leading to more efficient systems that can be planned with a long term perspective.

9. Politicians Pay

Because democracy is essentially a popularity contest, its a lot easier to succeed when you have money. The more football kits you sponsor, the more rounds you buy in the pub, the more donations you give to charity, the more ads you put in the paper etc etc the more popular you are amongst voters. That puts people who have less money, who are generally the people who need most representation, at a disadvantage. To re-balance this situation, elected politicians are paid well, to remove the temptation for them to obtain money from people who would seek to influence the way they act (ie corruption).

In Sortition, there is no competition. Everybody has the same chance of becoming a public representative as everybody else, so money is no advantage. It therefore isn’t necessary to pay politicians well.

10. Early pensions

Attracting capable people into politics is difficult. It takes a lot of work to build up your profile to the point where you can win an election, and even if you do get elected, you could lose your position within a couple of years, often through no fault of your own.

People who have built up careers in particular professions or who are self-employed are reluctant to sacrifice that to enter politics. Someone who spends 10-15 years as an elected representative is unlikely to be able to pick up where they left off after they leave politics.

To remove this disincentive, politicians are paid their pension earlier than people in normal careers.

In Sortition, a person chosen by lottery to be an elected representative would only serve a single term of 5 years. They would not have to sacrifice any more of their career than that, and their position would be secure during that 5 years. It would therefore not be necessary to pay them an early pension.


The Irish Central Bank is destroying our cash!



At least that’s what Diarmuid O’Flynn of Ballyhea says No would have you believe.

O’Flynn is various things. He’s a former staff sports writer at the Irish Examiner, which apparently qualifies him to advise Luke Flanagan MEP on “on economic and environmental affairs” (Flanagan appointed him as his Parliamentary Assistant in the European Parliament in 2014). He was also a candidate in the European Parliament elections in Munster in 2014, picking up a credible 30,000 odd votes. All of this came about from his involvement with Ballyhea says No, a group of people in Cork who go out every week and march in protest at the State’s handling of the banking crisis between 2008 and 2010.

O’Flynn regularly writes to the national and local media outlining his version of the arrangements to deal with the insolvency in the banking system. The narrative of these letters is generally the same, namely, the European Central Bank forces the State to borrow money, which the taxpayer must pay back, to give to the Irish Central Bank, which the Irish Central Bank then “destroys”. He obviously concludes that this is a terrible injustice and that the practice should stop forthwith.

Given the complexities of the banking crisis, which were spun out by the media as a vast conspiracy in which a cabal of politicians and bankers attempted to usurp the State, O’Flynn’s thesis is easily digested. What could be more evocative in the aftermath of a banker induced crisis that the biggest bank of them all is forcing the poor Irish to burn their own money? Its a story that writes itself and never stops giving (which is very handy to have when you’re asking people to vote for you).

Of course, like most theories offered by the likes of O’Flynn, Flanagan and the various other journeymen who emerged on to the political stage after 2008 (who were strangely absent in their criticisms when the good times were rolling), its a load of nonsense.

Let’s try and peg it down.

In 2010, the Irish Government was faced with the following situation. The 4 domestic banks – AIB, Bank of Ireland, Anglo Irish Bank and Irish Nationwide – were bankrupt, and living off emergency day to day funding from the European Central Bank. They were bankrupt because loans they had made were not being repaid and were never going to be repaid. If any one of them failed (ie if unpaid bondholders sought their liquidation), confidence in the system would be lost and the entire system would collapse, vapourising billions of euro in deposits held by ordinary citizens and small businesses.

Some of the banks were more bankrupt than others. AIB and Bank or Ireland were the better of the 4, and could be stabilised by transfers from the State’s current budget and the National Pension Reserve Fund. The other 2, Anglo and Irish Nationwide, were banjaxed, and needed far more money, about €30bn give or take, to keep them above water.

This kind of funding was not available to the State. The National Pension Reserve Fund was empty, and the interest rates being demanded on Irish Government debt were so high that it was impossible to borrow money from the bond markets.

In a country that doesn’t share its currency with others (like Iceland), this wouldn’t have been a problem. The State could have issued more currency (“printed money”) and used that to re-stock the banks. Ireland didn’t enjoy that luxury. We use the Euro, and only the European Central Bank can increase the supply of Euro, which it is legally forbidden to do for the purposes of financing deficits (eg bailing out banks) in member states.

At the same time, the European Central Bank had a problem. If the Irish banking system went bust, it could tear down the entire Euro system. A solution therefore had to be found, which became what we now know as the Promissory Note.

The Promissory Note  basically allowed the Irish State to pretend it had €30bn spare, when in fact everyone knew that that €30bn would have to be borrowed at some time in the future when the Irish State could again borrow money on the bond markets.

The Promissory Note was what it said on the tin: a note promising to pay the holder €30bn at some time in the future. The State gave this note to Anglo Irish Bank, who then went to the Irish Central Bank and borrowed a real €30bn using the Promissory Note as security. The Irish Central Bank got this money from the European Central Bank, who used a mechanism called Emergency Liquidity Assistance to increase the supply of Euro available to the system. Anglo paid off its creditors, so that they didn’t try to liquidate the bank, and the system survived.

All of this was a roundabout way of doing what the European Central Bank was legally prohibited from doing, namely giving the Irish state money to sort out its budgetary problems (the €30bn shortfall required to sort out Anglo and Irish Nationwide), so the European Central Bank secured a firm commitment from the State that the €30bn that had been magic’ed up out of nowhere would disappear again as quickly as possible, so that the European Central Bank was not seen to be breaking its own rules.

The agreement made was therefore that when the State paid the €30bn it had promised to pay the holder of the Promissory Note, the holder of the note (the Irish Central Bank) would not add those funds to their balance sheet as real money. In that way, the original “pretend” €30bn would disappear out of the system and not be used by the State to pay for real things like schools and hospitals.

This is why when the State transfers Promissory Note payments (via the National Treasury Management Agency, who raise money on the bond markets on the State’s behalf) to the Irish Central Bank, the Irish Central Bank does not pass those through to their balance sheet, which effectively deletes the money from the system. This is the process that O’Flynn and others refer to as “destroying our money”.

Of course, it all amounts to the same thing. We, the taxpayer, bailed out the banks.

Whether or not this was the right thing to do will be a question for historians. What we do know is that while the bailout was expensive, our banking system survived and our economy recovered. Whether this would have happened in the event of the banks being liquidated remains unknown.

The Ballyhea Says No campaign believes that the State should stop paying the annual Promissory Note payments to the Irish Central Bank.

This is an option for the State, but in involves enormous risks, which are never referred to by Diarmuid O’Flynn in his various correspondence.

(Update: See note at the end of the article.)

Principally, it would destroy the trust that exists between the Irish banking system and the ECB, would would leave the Irish banking system without a lender of last resort to finance its day to day operations.

It would also undermine the State’s credibility as a sovereign debtor, making it harder and more expensive for the State to borrow money to finance both current and capital spending.

Both of these outcomes would evitably push the State in the direction of Greece, and the inevitability of a euro exit.

Obviously, many people view that option favourably, but it is still an option that no one seems to be willing to be first to try.

Note: In 2013, the Promissory Notes held by the Irish Central Bank were replaced by long-term Government Bonds. The idea behind this move was that the repayment period could be extended and the bonds sold when market conditions were favourable, accruing a capital gain profit for the Irish Central Bank that would ultimately revert to the State. The same arrangement in relation to the deletion of the face value of the bonds still applies, however.



Train Etiquette

CS16034027Some tips for travelling by train so that you stay on the right side of your fellow passengers.

Good: Read a book
Bad: Ring all your friends and have the same innane conversations with each of them in succession

Good: Listen to music on your earphones
Bad: Repeatedly try to strike up a conversation with someone who is listening to music on their earphones

Good: Sit upright in your seat
Bad: Remove your shoes and several other items of clothing and convert your seat, and the one next to it, into a bed, as if you were travelling in First Class on Singapore Airlines

Good: Do not smoke
Bad: Exit the carriage at each stop and agreesively smoke half a cigarette, before returning to your seat smelling like the carpet in a 1980s Nite Club

Good: Do some work on your laptop
Bad: Tap loudly on your laptop keys, to make sure everybody around you knows that the work you are doing on your laptop is much more important than theirs

Good: Send a brief txt message to someone to let them know you are on the way
Bad: Engage in a 2 hour txt marathon with someone, with your keypad tone turned up to the maximum, rather than ringing the same person and disposing of the conversation in a couple of minutes acheter cialis

Good: Have a nap
Bad: Enter a deep sleep, and snore like a cart horse

Good: Have a glass of wine from the catering trolley
Bad: Drink half a bottle of vodka, imagine that other passengers would like to hear you sing a song, and then pass out in the toilets

Good: Eat a sandwich, and dispose of the wrapper in the litter bins provided
Bad: Eat a chicken curry, with rice and chips, and leave the foil containers, paper bags and plastic cutlery strewn about tables and seats after you alight at your stop

Good: If you have larger luggage items, wait until other passengers have alighted before removing them from the luggage racks
Bad: Attempt to alight from the carriage with your large luggage items before any other passengers, placing yourself under pressure to remove the items from the rack quickly, causing you to panic and have a heart attack