10/6/2013: Fitch on Irish Banks

Both Fitch and S&P have in the recent past questioned the model of Irish banking sector crisis resolution on the foot of the apparent link between the banks balance sheets and the exchequer.

Today, Fitch issued another report on Irish banking sector, titled "Peer Review: Irish Banks"

The report claims that Irish banks' current ratings "are constrained by the significant risks that remain in the Irish banking system. However, support remains an important rating driver and Fitch considers that the Irish authorities' propensity to support the 'pillar' banks, Bank of Ireland (BOI) and Allied Irish Banks, p.l.c. (AIB) remains undiminished, despite the withdrawal of the Irish Bank Eligible Liabilities Guarantee (ELG) in March 2013."

Crucially, "Fitch believes that the pillar banks' performance will continue to track within the stress case scenario of the 2011 Prudential Capital Assessment Reviews (PCAR), however these tests were framed on a Basel II basis. Since then capital expectations of market participants have increased. The 2014 PCAR may revise the stress assumptions and requirements to align more closely with Basel III." The kicker is that the banks will need new capital ('might need' another state injection as opposed to 'will need' capital).

"As Irish banks' capital ratios continue to be eroded and a return to profitability only appears feasible in the longer term, the banks may need to raise additional capital before they can contemplate a future independent of state support", Denzil De Bie, a Director in Fitch's Financial Institutions Group told Reuters.

The old kicker is that assets and capital held by the Irish banks remain weak, "with high NPLs and impairment charges, especially against commercial real estate and residential mortgage loans. Although the rate of deterioration slowed at BOI and AIB in 2012, Fitch believes impairment charges could increase during 2013 and 2014, with arrears reaching a peak in 2014, as the banks accelerate the resolution of mortgage arrears in line with new targets set by the Central Bank of Ireland in March 2013."

"Asset quality is weak in the Irish banks, with NPL ratios of 16%-40% in the Fitch-rated
institutions at end-2012. The banks also report a significant portion of their loan book to be past
due but not impaired."

Peaking of mortgages arrears per PCAR2011 starts in 2014 and goes on in 2016-2017.

"Underlying pre-provision operating profitability is structurally very weak because of the long-term, very low-yielding mortgage loans in their books. Until rates rise, Fitch considers that a return to sustainability will only be possible as the various restructuring and cost control plans of the banks begin to yield results. Fitch expects a return to operating profitability to be delayed until at least 2015 because of the continued erosion of earnings from high but reducing impairment charges."

Now, recall that per PCAR2011, Irish banks were supposed to fund their full losses out of operating profits starting with 2015. So far, Fitch is not saying there is excess (above PCAR2011 stress test assumptions) level of stress in the system, but Fitch does seem to point to the already recognised two pressure points:
- continued deterioration on the assets quality side, and
- Basel III.

And the banks are still dependent (and will remain for some time to come) on state/central bank supports: "with loan/deposit ratios still at a high 130%-230% in the Fitch-rated banks at end-2012, wholesale, government and European Central Bank funding still forms an important, albeit reducing, component of the Irish banks‟ funding bases." Why? Because deleveraging is by far not complete:

On banks doing their bit to get credit flowing to the economy:

And per stabilisation of deposits:

10/6/2013: Corporate Tax Haven Ireland Weekly Links Page

We score the 'unique' one in the world of tax arbitrage / err... tax havens... our own proper name. And FT just 'graphed' it:
http://www.ft.com/intl/cms/s/0/e0c8317c-ceaf-11e2-8e16-00144feab7de.html#axzz2VqnobwHj

For more links to worldwide reporting of Ireland as corporate tax haven, follow the second link in this post:
http://trueeconomics.blogspot.ie/2013/05/2652013-corporate-tax-haven-ireland.html or
http://trueeconomics.blogspot.ie/2013/05/1452013-corporate-tax-haven-ireland.html

10/6/2013: Italian GDP for Q1 2013

Italian GDP release for Q1 2013 in few tweets and a picture

So, 'fail' on preliminary reading, showing lead indicators being too optimistic. Expectations average was for -2.2% decline. And per components:

 Note the last one - growth crisis accelerating, not otherwise.

Note one positive contributor... the only one...

And quarterly changes on real GDP side:

So we know austerity has been savage. Really, savage...

10/6/2013: Did UK Taxpayers 'Rescue' Ireland?..

An interesting story today in The Times. Here's a report on it from The Telegraph (http://www.telegraph.co.uk/finance/business-news-markets-live/10109577/Business-news-and-markets-live.html go to 7:10am post). Emphasis is mine:


"The Times is leading with the story that Britain has given a back-door bailout worth around £10 billion to the Republic of Ireland in an arrangement that was never explicitly approved by Parliament. The money has been pumped into Ulster Bank, a subsidiary of the state-owned Royal Bank of Scotland which was rescued by a public cash injection of £45 billion five years ago."

What's the gist? "New figures show that Ulster Bank, which operates predominantly in the Republic despite its name, has accounted for approximately one in every four pounds of losses at RBS since 2008... Almost one pound in every four injected into the two state-backed banks by the Government has gone directly into the Irish economy, the two lenders' subsidiary accounts show."

How so, may I ask? "Between 2009 and 2011, RBS made "capital contributions" totalling €9.13bn (£7.6bn) to its Dublin-headquartered subsidiary Ulster Bank Ireland. Over the same period, Lloyds transferred £6.41bn to its Irish operation, Bank of Scotland (Ireland), before dissolving the business.
The total – £14bn – amounts to more than a fifth of the £65bn UK taxpayers injected into RBS and Lloyds in 2008 and 2009, and is expected to rise further. Analysts estimate that RBS transferred another £2bn last year."

How so, I ask again?

You see, in reality, there was no £10 billion bailout from the UK to the Republic of Ireland and the money injected into Ulster Bank did not go 'directly into the Irish economy'. What did happen is that a bunch of bondhodlers and interbank lenders to the Ulster Bank were made whole on the liabilities which the Ulster Bank would not have repaid, were the UK taxpayers not pumping money into it. Truth is, the UK taxpayers, like Irish taxpayers, were made subsidies to the international banking funding scheme. Not to the Irish economy or to the Republic of Ireland.

The UK taxpayers did lend money to the Irish Government under the Troika+ 'rescue' deal and we shall say thank you to them for this much, especially since these loans were made on terms that matched fully multilateral loans. But the Republic of Ireland and its economy have nothing to say on the UK taxpayers being wrongfully made pay ever cent on the euro of the Ulster and BOSI borrowings.

Full stop.

8/6/2013: Shortages of Safe Assets & Banks Recaps - troubled waters of Basel III

Here's an interesting view on European banks: http://www.voxeu.org/article/urgent-need-recapitalise-europe-s-banks . The core point is here:

Chart: Market-to-book value of European banks:

Quote: " On average, the market-to-book value of European banks now is about 0.50 (see Figure 1). This indicates that accountants’ estimates of bank capital are far too rosy, and that banks have substantial hidden losses on their books."

But there's more. "Until now, Europe’s banking sector has been kept afloat by implicit state guarantees of virtually all liabilities. …in 2012 these guarantees provided banks in Europe with an annual average funding advantage amounting to 0.3% of total assets. …An annual funding advantage of 0.3% of assets can be capitalised to be equivalent to 2% of total assets, on the assumption of a discount rate of 15% commensurate with banks’ uncertain earnings prospects. Given total banking assets of €33 trillion in the Eurozone, we are talking about an implicit guarantee of about €650 billion."

In short, through the crisis, European banking system was pumped with implicit supports to the tune of EUR2.6 trillion.

More than that. EBA is delaying stress tests into 2014, so we won't even in theory be able to know what is going on in the banks. Except, one has to doubt that the theory is a good instrument for the reality, as EBA has managed to bungle all stress tests it carried out to-date. In other words, EBA is acting de facto to increase implied supports as it delays and evades recognition of losses.


Look at the following paper: http://www.cpb.nl/en/publication/private-value-too-big-fail-guarantees (alternative link via ssrn: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2271326) which concluded that: "over the period 1-1-2008 until 15-6-2012" for only 151 European banks, "the size of the funding advantage' granted by various state supports "is large and fluctuates substantially over time. For most countries it rises from 0.1% of GDP in the first half of 2008 to more than 1% of GDP mid 2011. Our results are comparable to findings in previous studies. We find that larger banks enjoy on average higher rating uplifts, but the effect of size does not increase anymore for banks with total assets above 1,000 billion Euro compared to banks with assets between 250 and 1,000 billion Euro. In addition, a higher sovereign rating of a bank‟s home country leads on average to a higher rating uplift for that bank."

In other words, remove the protectionist supports and the system will crumble.

Note, the paper also cites the case of Ireland. "When we take a closer look at the funding advantages of banks from Spain, Italy, and Portugal in Figure 7, we see that the advantages enjoyed by banks are relatively small in these countries. This can be explained by the smaller rating uplifts that the banks from these countries enjoy. The fact that rating uplifts are relatively small in these countries is likely to be related to lower sovereign creditworthiness. The banking sector in, for example, Spain is not necessarily smaller when compared to GDP than the banking sector in France and Germany. So this is unlikely to explain the results we find. In Ireland, funding advantages are relatively large compared to the other three countries. The funding advantage enjoyed by Irish banks is somewhat higher than the advantage enjoyed by French and German banks."

Figure 7: funding advantage per country (Spain, Ireland*, Italy, and Portugal) (*note that the figure for Ireland is drawn on a different scale)

Now, when you just thought that the resolution path (as suggested by the article linked above) is well-known: assess, expose, recap, things are getting slightly out of hand. BIS has warned that simply pumping more capital into banks might be a wrong thing to do. Here's the BIS paper: http://www.bis.org/publ/cgfs49.pdf.

In the nutshell, BIS is saying that core tools for dealing with banks insolvency so far are… possibly… making these banks less safe, not more. The problem is that under Basel III, safety of bank capital is determined by safety of underlying assets held as capital (so far - fine). These 'safe' assets are… err… Government bonds and Government-guaranteed commercial paper (e.g. MBS). The idea is that 1) these assets are more secure, thus provide better cushion in the case of distress, and 2) these assets can be sold (are liquid) easily to cover any losses.

Problem is: there is a shortage of 'safe' assets as defined by Basel. The shortages are riven by 1) higher demand for these assets, 2) smaller number of 'safe' (highly-rated) sovereigns, 3) reduced issuance by highly-rated sovereigns ('austerity') and 4) central banks and non-banking financial institutions (e.g pensions funds) hoovering up these assets. BIS is not worried about the shortages of safe assets, but here are some links on this:

• from the Economist: http://www.economist.com/blogs/freeexchange/2013/02/safe-asset-shortage
• and from BIS own researchers: http://www.bis.org/events/conf120621/gourinchas_paper.pdf
• from Bruegel: http://www.bruegel.org/nc/blog/detail/article/1023-blogs-review-the-safe-asset-shortage/
• from FT Alphaville: http://ftalphaville.ft.com/tag/shortage-of-safe-assets/ with a chart:

In turn, shortages of safe assets, even if nascent, can drive ups emend for riskier assets and thus increase riskier assets allocations by the financial intermediaries (think insurance and pensions funds on drugs).

Here's a very interesting discussion of what can happen next from @simonefoxman: http://qz.com/88585/new-fears-of-financial-interconnectedness-highlight-the-delusion-of-bank-capital/?oref=dbamerica

"And therein lies the risk. The assets don’t change hands permanently: It’s just one institution lending junk bonds to another and borrowing higher-quality ones in return. So a default on one side could translate into problems for the other. In such cases, the “high-quality capital” is only as reliable as the low-quality capital it was exchanged for. Moreover, if assets on either end of such a deal are mispriced, it could have knock-on effects across the financial system.

As a result, warns the BIS, the financial system is becoming more interconnected—and thus more susceptible to system-wide problems of the kind we saw in the financial crisis a few years ago."

Once again, Basel III might be off the target by a mile when it comes to improving quality of risk buffers in the banks… Just as with liquidity buffers: http://trueeconomics.blogspot.ie/2013/05/352013-basel-25-can-lead-to-increased.html

8/6/2013: Euromoney Credit Risk summary for Ireland

Latest results for Euromoney Country Risk survey for Ireland:

7/6/2013: Weekend Reading Links: Part 2

In the previous post I have compiled some reading links for the weekend: http://trueeconomics.blogspot.ie/2013/06/762013-weekend-reading-links-part-1.html

As promised, here is a follow up second post with the rest of links.


The world of clocks and daggers is, it turns out, also the world of some appreciation for the arts. As reported here: http://www.wired.com/threatlevel/2013/06/analyst-who-cracked-kryptos/ the CIA staff has finally cracked the code of the Jim Sanborn's cryptographic sculpture at the CIA’s HQs. It took 8 years and then it took another 25 years for the fact to be revealed to the public. But even more fascinatingly, one last coded section of the sculpture is yet to be deciphered…


Not exactly art or science, but Apple is a leading light in the world of design-driven approach to manufacturing. It has been brilliant, irreverent, non-standard and always expressive through out decades. It has also been a brand icon for creative industries )rows of Macs on ad agencies desks) and as such it is associated with the very iconic anti-IBM commercial that launched it http://www.youtube.com/watch?v=VjyrqVgWPXY.

But now, Apple is the new IBM… http://blog.stephengates.com/2010/04/12/welcome-to-1984-how-apple-has-become-the-new-ibm/ and worse, it is anti-Apple too, for the man who did this: http://www.youtube.com/watch?v=FXGrVEnKDko would have probably never been hired into Apple today: http://venturebeat.com/2013/06/03/if-steve-jobs-applied-for-a-job-at-apple-today-theres-no-chance-in-hell-hed-get-hired/ .


The next link, as I promised not to do anything 'economics'-wise, is not so much about economics of something, but rather economics as a field of inquiry. Anyhow, I find it intelligently written and actually quite good: http://www.theatlantic.com/business/archive/2013/06/should-we-trust-economists/276497/


Two related articles on art of light:
http://www.theartnewspaper.com/articles/What-happens-when-the-lights-go-out/29752
and
http://www.theartnewspaper.com/articles/Flavins-will-see-the-light-of-day/29751

I prefer Dan Flavin's works: here he is in his symmetric error of homage to Tatlin: http://www.moma.org/collection/object.php?object_id=81337

Of course, irony has it, Tatlin was asymmetric: http://kdigital.tumblr.com/post/576318843/model-for-the-monument-to-the-third-international It always puzzled me why in all of his homages to Tatlin (of which Flavin made 8) he was always symmetric in interpreting Tatlin's tower. All said, here's Flavin at his best http://www.davidzwirner.com/wp-content/uploads/2011/11/33-400x266.jpg

And finally - another reminder - I will be taking part in http://www.rar.ie/ on Thursday 13 June, 2013, from 8.00pm – 2.30am.


Have a great weekend and stay tuned - there will be economics posts on the blog.

7/6/2013: Weekend Reading Links Part 1

The weekly links page for weekend reading materials is now becoming a regular feature of this blog. Why? Because in my daily life I am privileged to come across a number of fascinating things - science and arts related - and these are simply worth sharing. Also because art and science are more important in value to humanity than economics (the bit of economics that is beyond science-art overlap, or, as I call it, applied economics). And finally, because it is often fun to tease out bits of my own thinking on the matters of art (and less so on the matters of science).

So here's this week's list in no particular order.


Since my days at IBM I came to appreciate the complex nature of data visualisation. Prior to my days at IBM I came to appreciate the value of visualisation in shaping our understanding of the world when information about the world is transmitted to us by means of data. Now, here's an article that added to my understanding of visualisation as a tool for shaping the long-term future of the world: http://venturebeat.com/2013/06/07/sparkon-releases-future-visualization-engine-to-help-kids-choose-a-career/ . Why is it important to me? Ok:

1. It contains direct links to human capital (sorry, err… I know, no economics)
2. If visualisation is about narrating the world, making it more comprehensible, then visualisation is also capable of altering the world around us by altering our understanding of it. That is second-order loop of causality: world causes data, which causes (via visualisation) our understanding which in turn causes us to interact with the world and thus cause data… If we take the visualisation as a tool for directly shaping human choice of careers, fields of study, inquiry etc, then the visualisation over time becomes the first order shaper of the world, right? Scary… You bet:
3. The entire idea of shaping (via any specifically designated tool) one's future, as in "Let’s say your strongest “career personality type” is artistic follows by enterprising, you are extroverted, and you are passionate about art and video games. Sparkon suggests a range of jobs that bring all these together, like video game designer or art director, and suggests majors and skill sets that are useful for these areas. The engine then suggests specific videos, like “careers in the video game industry,” computer programming, or graphic design. There are also more general videos about college and SAT preparation, communication and leadership etc… Students can create a Netflix-style queue with recommended videos, and parents can also get involved by monitoring their kids’ progress to see what they are exploring." Missing something? Oh, yes, Sparkon won't really suggest you become an artist, cause you know… "there's no money in that". Now, imagine the world where humans are discouraged from making any errors by constantly being steered / selected into a stream of activities and information determined by a machine?.. Here comes Sparkon generation of drones?

Next, back to Venice Biennale:
"When I got out I felt I had escaped from the suffocating embrace of a revenant worthy of De Chirico. But this remake is perfectly in tune with the market of today now that the fairs have given up on the fuchsia and chrome-yellows of Murakami and Koons and have taken to showing off the pauperish neutrals of the Seventies. It is a much more radical product than the efforts of the young neo-conceptualists, but highly fashionable at a time when collecting is wearing the hair-shirt of the most hypocritical of penitents."

What?! Ah, yes, yes… that's about current reconstruction of the 1969 exhibition http://www.veniceconnected.com/node/29046. The review of it - the source of the quote - is here: http://www.theartnewspaper.com/reviews/The-Prada-Biennale-show-Creative-Energy-turned-into-Dead-Fetishism/29836 . Comes August, I am looking forward to being as suffocated by the embrace of the exhibition as I was suffocated by the embrace of the review, just as I am certain to be suffocated by the Venice stuffed by the 30+ degrees sun heated bodies of tourists, who usually leave Biennale the last on the list of amusements worth attending…


The art of displaying dead art (point above) is different from the art of feeding dead art to a dead dictator… and the latter doesn't quite offer the promise of the excitement of the former. Except when the dead dictator is Kim Jong-Wong-Bi-Din-Dong-Il of North Korea. Fascinating and fantastic account of Kim's favourite sushi chef depicted in a lengthy interview in http://www.gq.com/news-politics/newsmakers/201306/kim-jong-il-sushi-chef-kenji-fujimoto-adam-johnson-2013?currentPage=1

My favourite rhetorical bit: "And guesthouse is code for a series of palaces decorated with cold marble, silver-braided bedspreads, ice purple paintings of kimilsungia blossoms, and ceilings airbrushed with the cran-apple mist of sunset, as if Liberace's jet had crashed into Lenin's tomb." My favourite human bit: Fujimoto's two abandoned families. It has to be a rare twist of fate in which one abandons his two daughters and a spouse to serve the dictator in exchange for having a family that he subsequently condemns to labour camps by escaping the dictator… and so on… do read!


Science or fiction? http://www.forbes.com/sites/alexknapp/2013/06/06/take-that-nsa-scientists-hide-communications-using-a-hole-in-time/ So basic idea is there are holes in time (not only the ones that follow copious consumption of alcohol) and you can hide stuff in them (well, for now, no white elephants - ease off, politicians with any plans). My favourite quote: "In practice, this system isn’t perfect." No sh*t, Sherlocks…


New stuff on 'how planets are formed' http://www.siliconrepublic.com/innovation/item/32967-astronomers-discover-comet/ Predictably, nothing new on why planets are formed… but that is a different topic.


On the way we know stuff, plus the way we communicate, a very interesting paper from Cornell University "Social Media and Information Overload: Survey Results" (http://arxiv.org/abs/1306.0813) looks at information flows via user-generated media, "such as Facebook, LinkedIn and Twitter' based on smallish sample of 587 participants in a UK survey. "Participants who experience information overload are those who engage less frequently with the media, rather than those who have fewer posts to read." Kind of obvious: less you engage, bigger is build up of unanswered communications. "Microbloggers complain of information overload to the greatest extent. Two thirds of Twitter-users have felt that they receive too many posts, and over half of Twitter-users have felt the need for a tool to filter out the irrelevant posts." I have no idea how I would have answered their survey… maybe because I feel that I am more surveys-overloaded than twitter-overloaded?


Much is written by humanity on the topic of happiness. So much so that even the Guardian (a miserably Lefty paper) has gotten to the topic, let alone the economists (the latter also more often than not read the Guardian, which is clearly correlated with both being unhappy on average more than non-economist and so on…) Read: http://www.guardian.co.uk/commentisfree/2013/may/31/secret-happiness-complicated-research?INTCMP=SRCH - it is somewhat 'all over the place' and not too deep, but is interesting nonetheless. And when you finished, read

•  http://trueeconomics.blogspot.ie/2011/09/3092011-returns-to-beauty.html
•  http://trueeconomics.blogspot.ie/2013/05/452013-higher-income-vs-higher.html
•  http://trueeconomics.blogspot.ie/2009/02/european-v-american-model-labour-and.html
•  http://trueeconomics.blogspot.ie/2009/07/interesting-research-happiness-on-venus.html
•  http://trueeconomics.blogspot.ie/2013/05/3052013-more-on-wellbeing-v-income.html

And thereafter, come back to this page…


Last week, I posted links to several articles on the proof of the theorem that postulates that gaps between prime numbers are bounded (see: http://trueeconomics.blogspot.ie/2013/05/2552013-saturday-reading-links.html). Here's a human story behind the proof author:
http://www.wired.com/wiredscience/2013/05/twin-primes/ - worth a read.


In contrast, here's the design for much-awaited Lego House design: http://aboutus.lego.com/en-gb/news-room/2013/june/the-right-look-for-a-lego-house/ and, argue with me on this, but I think it is banal. Made even more banal by monochromatic white, which is so 'not Lego' and thus expected in the world of reverse psychology of asymmetric innovation - aka the world of on-line aesthetics.


Stay tuned for more reading links once the kids are put into their beds...

7/6/2013: Goodish news on capital investment in Ireland in Industry

Given the volatility in capital sales and acquisitions in Ireland, based on quarterly data, it might be premature to say much about the trends for capital investment in 2013 so far, but nonetheless, at least we are having some good news to go along with the sunshine outside.

Per CSO: "Capital acquisitions in industry in the first quarter of 2013 were €661.3m, compared with €580.8m in the first quarter of 2012. Among the main contributors to capital acquisitions were the following sectors:

• Basic pharmaceutical products and preparations with €102.5m.
• Computer, electronic and optical products with €92.9m.
• Capital sales in the first quarter of 2013 were €89.9m, compared with €218.3m in the first quarter of 2012. 

The main contributors to capital sales were the following sectors:

• Other manufacturing with €33.8m.
• Basic pharmaceutical products and preparations with €27.1m."

You can see the data here http://www.cso.ie/en/releasesandpublications/er/cai/capitalassetsinindustryquarter12013/#.UbBltyuglF8 but, as usual, this blog should add some value to the reader. Hence, below is the chart showing Q1 figures for 2011-2013 in terms of net capital acquisitions (new investment) in the industry:

And the good news is (conditioning on the above comment on volatility): 

• Net capital acquisitions rose in Q1 2013 compared to Q1 2011 and Q1 2012
• The rise in net capital acquisitions was marked and significant in 2012-2013 period
• Rise in new investment has been much broader based across various sectors in Q1 2013 than in Q1 2012, although the MNCs-dominated sectors of Computer, electronic & optical equipment and Pharma have been the two largest contributors to the increases in capital investment in 2012 and 2013.

7/6/2013: Government 'scorecard' on unemployment: May 2013

In the previous post (http://trueeconomics.blogspot.ie/2013/06/762013-live-register-may-2013-headline.html) I looked at the very broad trends in the Live Register data for May 2013. This time, let's do something slightly cheeky. Recall that the Government is keen on referencing jobs creation and unemployment reduction numbers as the sign of the success of the state policies. Recall also, that I have previously showed, repeatedly, that at the very least when it comes to broader unemployment data, these claims might be a serious over-stretching of reality (http://trueeconomics.blogspot.ie/2013/05/3052013-official-broader-unemployment.html and http://trueeconomics.blogspot.ie/2013/05/3152013-part-time-v-full-time.html ).

Before we proceed, let us recognise the following facts and plausible conjectures:

1. Irish Government has inherited a massive task when it comes to dealing with unemployment and jobs creation on foot of the mistakes made by the previous Government and, more importantly, on foot of an unprecedented economic crisis we face;
2. Irish Government has very limited resources it can deploy to deal with unemployment crisis;
3. Irish Government has been making, in my opinion, honest efforts to attempt dealing with the crisis.

With the above points recognised, let's build a table measuring the current Government progress on jobs creation based on Live Register stats. With a dose of over-exaggeration (please, do not take this as a direct indictment of the Government efforts etc, just as a response to Government-own propensity to push out unemployment numbers as evidence of own success), here is 

Irish Government Performance Score Card

As marked by blue color, Official Live Register tends to confirm Government's claims: since taking the office, this coalition saw, to-date, a 3.8% reduction in the Official Live Register. However, the same period saw an increAse of 4.3% in casual and part-time workers who require some unemployment supports to sustain themselves and their families, as well as a massive 32% increase in state training programme participants. The latter is good, in so far as people are getting at least some training and apprenticeships access, but it is also bad news for the Government, as it means that in reality, actual numbers of those receiving Live Register unemployment assistance and supports rose 0.8% on Q1 2011, not fallen. Meanwhile, as we know, over Q1 2011-Q1 2013, official labour force numbers fell 0.55%.

7/6/2013: Live Register May 2013: Headline Trends

Live Register numbers for May 2013 were out yesterday and I am only now getting to them (busy few days speaking and dealing with students etc), so here is the first of two posts on the subject. As usual, first up: headline numbers.

-- Total number of persons on Live Register in May stood at 426,100, which is 700 down on April 2013. Y/y LR is down 2.52% and this is an improvement on 2.29% decline recorded in April 2013. To-date Q2 2013 figures are down 0.53% on Q1 2013 and down 2.58% on Q2 2012. Again, as with monthly readings, this y/y decline in Q2 2013 to-date is deeper than the decline in Q1 2013 which posted -2.29%.
-- Total number of Live Register supports recipients to-date (official number, as distinct of the actual one - see data on state training participants below) is 266,607 ahead of pre-crisis 2000-2007 average.

In the charts above, I am referencing Live Register inclusive of the State Training Programmes participants. The reason for this separate data reporting is that while they continue to receive unemployment (Live Register) benefits, they are not included in the official Live Register counts. Please note: state training programmes participation is reported with 1 month lag compared to Live Register, so the latest number we have is for April 2013, which means that combined metric for May simply incorporates May 2013 data for Live Register, plus April 2013 data for State Training Programmes participation.

• In April 2013, there were 86,042 Live Register supports recipients who were officially engaged in State-run Training Programmes (STP). This was up 4.72% on April 2012.
• In April 2013, m/m change in Live Register was -200, while m/m change in STP was +673. In other words, in April, entire m/m 'decrease' in the official Live Register was 3 times smaller than an increase in STP.
• In April 2013, y/y change in official Live Register was -10,000, with 3,881 of these accounted for by increases in STP. 
• Put differently, in April 2013, m/m there was no decrease in unemployment benefits recipients' numbers at all, and in fact there was a m.m increase in these of some 473. Also in April 2013, y/y officially-reported massive decrease of 10,000 in official Live Register was really a smaller scale (albeit still welcome) decrease of 6,119.
• In May 2013, estimated Live Register + STP measure of unemployment benefits claimants stood at 512,142, which represents 23.96% of the labour force. Put differently, almost 1/4 of Ireland's labour force is currently in receipt of some form of unemployment assistance, which is well ahead of the official Live Register-implied estimated unemployment rate of 13.7% which would correspond to roughly 292,838 individuals.

• The numbers of those on the Live Register under the age of 25 was stuck in May at the same level of 68,900 as in March and April 2013. This represents a decline on 69,700 recorded in February and roughly corresponds to the levels last seen in December 2008-February 2009. However, it is most likely that these numbers are superficially depressed by the STP participation. Sadly, we do not have data on STPs reported regularly by the CSO to determine the exact extent of unemployment supports in the younger population.
• In May 2013, 16.17% of all Live Register supports recipients were under 25.
• Y/y, number of younger LR recipients was down 7.27% and so far in Q2 2013 the number is down on average 7.48% on Q2 2012.

Per CSO: "The number of long term claimants on the Live Register in May 2013 was 191,997." Overall, the number of long term claimants increased by 3,268 (+1.7%) y/y, while the proportion of the short-term claimants dropped to 54.5% (229,740) from 56.4% (244,178). This suggests that, as would be normally expected, short-term unemployed are finding it easier to find jobs than their longer term counterparts, and that, potentially, this effect is being reinforced by accelerating exits of the long-term unemployed due to benefits expiration.

6/6/2013: Detroit is about to go bankrupt... differently from the Irish banks

So who is to say sovereign (or rather quasi-sovereign) defaults are a rarity in fiscal + currency unions? Here's a story about forthcoming, well-flagged in advanced Chapter 9 bankruptcy for Detroit: http://www.theepochtimes.com/n3/93438-detroit-facing-chapter-9-bankruptcy/

And, guess what - the story is telling in more than just one context. The terms and conditions of the restructuring will be ugly, but manageable... And the sequencing of events is revealing:

• Step 1: Detroit had $15.7 billion debt load it cannot repay - diagnosis was set as insolvency. 
• Step 2: The city was taken over by the state of Michigan and emergency manager was appointed.
• Step 3: The state of Michigan needed a calm evaluation of the problem confirming the diagnosis of insolvency and it was deemed to be structural (economy suffering from unsustainable levels of unemployment, declining population, loss of revenues, etc, but also cost overruns).
• Step 4: Rating agencies dropped ratings on Detroit debt and debt limits kicked in before then.
• Step 5: Chapter 9 bankruptcy, forced deal with the unions and Financial Advisory Board was set up with very clear termination objectives.

The sequencing of events above is distinct from what has happened in the case of Ireland's banking crisis resolution, where the above steps were re-ordered as follows:

1. Steps 4 and 5 (resolution steps) took place ahead of any assessment and diagnosis postulation and confirmation (banks guarantee issuance)
2. Step 3 took place next in the form of PCARs assessments
3. Step 2 (takeover) took place only after the PCARs
4. Diagnosis was never fully correctly established - all banks, save for Anglo and INBS are still considered officially solvent
5. Step 5 never took place with exception of Anglo and INBS

In other words, we never created a security cordon around the banks that would have resulted in banks takeover prior to guarantees and recapitalisations and this has meant that the banks were always able to use the threat of disclosure of insolvency as the means for bargaining out improved position vis a vis the taxpayers. 

Best proof of this: at no point in time did the state of Michigan tell the markets or the nation or its own taxpayers that Detroit will never be allowed to go bust. In contrast, during 2008-2010 period, Irish Government repeatedly asserted that the banks will be provided all and any funding necessary to stay in business.