Another group of stories I often recommend in my Latest News and Commentary section of my blog relate to the economic and financial crisis in Ireland. For those who are unaware of what is going on, Ireland, one of the most prolific economies in Europe and the world just a few years ago, has way too much debt and has a banking system that is teetering on collapse. The Irish government spent billions of Euros propping up a bunch of failed banks riddled with bad loans while implementing harsh austerity measures (measures designed to reduce government deficits by cutting back on spending, reducing benefits, and reducing the availability of public services) that are similar to what other European leaders are now trying to implement under the direction of the European Union (EU) and International Monetary Fund (IMF).
Today there are key financial indicators suggesting that Ireland is doomed. Ireland is very likely going to require a bailout from the EU/IMF to prevent it from declaring national bankruptcy. However, an Irish economics professor who foresaw Ireland’s collapse months ago recently wrote that the interest rate that the EU/IMF is likely going to charge to Ireland while lending it money (5%) is going to add even more debt to Ireland, which will practically make national bankruptcy inevitable anyway for Ireland. This economic professor now predicts tremendous social conflict (comparable to the Land War) and a major radicalization in Irish politics leading to potentially two “Civil War” parties fighting over control of Ireland.
If you do not live in Ireland you are probably wondering why you should care that a country like Ireland is about to implode economically and potentially explode socially in perhaps a period of civil strife. In this blog post I’ll attempt to explain why you should care about what happens to Ireland even if you do not own a single investment in anything.
One reason you should care is that Ireland may be a precursor to what happens in other European countries if European leaders somehow find the “courage” to implement austerity in face of very angry protests:
- Ireland did exactly what the EU/IMF is recommending heavily-indebted countries like Portugal, Greece, and Spain do to address their mountains of debt: make drastic cutbacks in government spending, reduce benefits, etc. In fact, Jean Claude-Trichet, the President of the European Central Bank (the European equivalent of Ben Bernanke), identified Ireland as "the role model" for heavily indebted European countries to follow earlier this year: “I don't want to elaborate more on Greece...Let me only say that Greece has a role model, and that is Ireland... Ireland took very seriously its problems”. If the EU/IMF is directing every heavily-indebted country in Europe to follow the same path as Ireland then you may eventually have several European countries on the brink of civil war and political revolution…something that the Bible suggests we will see more of prior to the start of the End Times.
Another reason why you should care about what happens to Ireland is its fate could scare some heavily-indebted governments from pursuing drastic austerity measures and push them towards pursuing currency devaluation if it’s possible (it’s not a readily available option yet for individual countries that use the Euro, but is an option for the U.S. and Britain). Austerity programs require people to make major, painful sacrifices like enduring a reduction in pension payments or perhaps paying higher taxes. Politically, leaders would prefer to avoid implementing austerity measures if they can so they can avoid a situation where people who are adversely affected by austerity take their anger out on them at the polls or through revolution. The failure of Ireland could give leaders an excuse to avoid austerity because they could claim that Ireland tried austerity and still failed.
- Whether it’s a good excuse or not is debatable because part of the reason why Ireland failed is because they acquired too much debt trying to save their failed banking system... something the U.S. has done with its bailouts of financial institutions and government-sponsored enterprises (Fannie Mae and Freddie Mac). Regardless of whether citing Ireland’s failure is a good excuse to avoid austerity or not, it is still a useable excuse for leaders who are looking for an excuse…
Leaders who choose to cite Ireland’s failure as a reason to not pursue austerity, may then view money printing/currency devaluation as the most preferred option to pursue (if it is a possible option) because this option does not require people to make obvious sacrifices initially. Instead, all a country would need to do is to turn on the "printing press" and “print the money” that it owes to people. According to Fed Chairman Ben Bernanke, the cost of “printing money” is virtually free these days-well at least for the U.S. government...: “But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost”.
- Therefore, Ireland’s failure could become another factor that brings us a period of global currency devaluation that is predicted by the spiritual forces of evil and is biblically possible.
Finally, another reason why you should care about what happens to Ireland is that its fate could actually push Europe to closer fiscal/political union, something that we may need to see before the End Times begin. An article by Stephen King, the managing director of economics at HSBC (a major bank), wrote an opinion piece in an Irish newspaper recently about how one potential outcome in Ireland’s crisis is for the E.U. to begin provide funding to Ireland (and others) like the U.S. provides states funding. Link
- Establishing this type of relationship would enable the EU to dictate how Ireland (and other countries who participate in this) spends their money to some extent.
Ireland is unlikely going to need a rescue in the coming days because it has enough money to last them until the early part of next year. However, Ireland is likely going to need a rescue when that money runs out because the interest rate on Irish government bonds is over 8%, which is a crippling rate for Ireland or any other country to pay. Ireland’s fate is likely going to have ramifications for investors and non-investors alike…
