Monthly Archives: February 2013

A vanishing team, but not for want of money

Pulling pints and laying bricks instead of togging out.

Pulling pints and laying bricks instead of togging out.

In an address to the Leitrim Supporters Club earlier this year, one of the Leitrim Senior Football team’s co-mangers, Brian Breen, appealed to attendees to help members of the of the current senior panel find employment.

He specifically referred to 6 or 7 players who were currently without work, and at least 1 or 2 who had indicated they may have to leave the panel.

This is nothing new for the team. In 2011, the Irish Independent reported that only 1/3rd of the the Leitrim Senior panel who had gathered in 2010 were still on the panel.

The continuing drain of players has become more and more evident in the team’s performances. Leitrim remain rooted at the bottom of Division 4 of the Allianz Football league, and have still never managed to win 2 back to back games in the Senior Football Championship.

Like most Irish men, I played Gaelic games in my youth, and was a member of my local club.

These days, my interest is in other sports. I have a passing interest in GAA, but I am not a passionate GAA supporter, and I do not claim to understand the deep-rooted traditions of the GAA.

However, I do retain some sense of logic, and can see very little logic in what is currently happening to the Leitrim Senior Football team.

Over the last 10 years, no effort has been spared in investing in GAA facilities in Co. Leitrim.

€3m was spent on a new stand at the county ground, €2m was spent on a state of the art training facilities, and considerable sums have been invested in club facilities through grants from the Sports Capital Fund and local fund raising.

Additionally, the Connacht Council has raked in millions of euro from gate receipts at Connacht Senior Championship games, and the GAA itself has been the beneficiary of considerable transfers from the FAI and IRFU from leasing Croke Park for soccer and rugby games.

All of this revenue has been retained within the GAA organisation, and invested in either the day to day running of the organisation or facilities.

That’s all well and good, but a well run organisation and top notch facilities is of little value if the GAA’s most valuable resource, its best players, are laying bricks or pulling pints in Sydney or New York instead of togging out for their county team.

Employment in Leitrim is a very scarce commodity. An appeal to the supporters of Leitrim GAA to help find work for players is well-intentioned, but when most of the supporters themselves are struggling to make ends meet, its unlikely to bear any fruit. Similar appeals have been made before, and nothing has changed in the general decline in the talent available to the management team.

Conversely, there are thousands of people in Leitrim who are willing to pay money to watch the county’s best players in action. Granted, the gate receipts and sponsorship that are available to a small county like Leitrim are not going to provide a full time income to a panel of players, but even the payment of a small appearance fee might be the difference between a player emigrating or not.

Of course, to suggest that a player be paid for togging out for a GAA match is to many the moral equivalent of taking a sledgehammer to the Sam Maguire.

Apparently, putting €200 euro in a players pocket as he leaves the dressing room will destroy the organisation, whereas the combination of paying his manager, putting a brand name on his jersey, selling advertising hoarding around the pitch, and charging a local radio station or RTE money for the rights to broadcast the game will not.

Like I say, I am not a die-hard GAA supporter, and perhaps I don’t understand the complex fabric of the GAA and its relationship with Irish society.

All I can comment on is what I observe, and as things currently stand in Co. Leitrim, your chances or pulling on the county jersey are far more influenced by your employment status than your ability to play the game.

There isn’t any logic in that, no matter what traditions you hold dear.

Whose debt is it any way?

Short term memory loss. Where did all the money come from if its wasn't from the banks?

Short term memory loss. Where did all the money come from if its wasn’t from the banks?

People in Ireland, and I suppose people in general, love to hate authority, and none more so than faceless, well paid authority like the European Central Bank (ECB).

This hatred was in full flood last week, as it emerged that the Fine Gael and Labour government had reached an agreement with the ECB to change the manner in which the Irish State makes good the impaired debt on the balance sheet of the Irish Bank Resolution Corporation, formally known as Anglo Irish Bank.

Previously, the Irish State have given the IBRC what is known as a Promissory Note, which is like the name suggests, a promise to pay the bank money at some future date, or in this, case approx. €3bn every year for 10 years. The IBRC then used this Promissory Note as security to borrow money from the Irish Central Bank to make good its balance sheet, so that it wouldn’t go bust and take the entire Irish Banking system down with it.

For a State collects approx. €35bn in tax revenue each year, and which has a sizeable budget deficit, €3bn per year is a sizeable chunk of change. A more palatable arrangement, argued the Irish Government, would be for the Promissory Note to be paid back over a longer period of time, which would give the State time to rebuild its economy, wherein the debt burden would require less credit financing, thereby reducing the cost to the Irish taxpayer.

A quite reasonable proposal it would seen, but the ECB is legally barred from engaging in what is called Monetary Financing, which means using the market mechanisms of the ECB, and it network of Central Banks, to provide de facto financial assistance to a member state.

The ECB viewed any extension of the debt held by the Irish Central Bank as Monetary Financing, and was loath to support any such move; and while the ECB was providing the bulk of the liquidity available to Ireland’s banking system, the ECB held all the cards.

That is until last week, when Irish Government officials finally won the ECB officials over to their side of the argument. Speculation has it that the ECB badly needed a success story, and Ireland was their prime candidate, so a deal was done to allow the Promissory Note to be converted into a series of long term bonds, reducing the Net Present Value of the debt being paid by the Irish taxpayer significantly.

To the casual observer, this would seem like a good news story. A conservative analysis of the likely cash flows arising from the deal shows that the Irish State will have an extra €1bn to play with in their annual budget for at least the next 10 years. It also means that the State’s cost of borrowing will come down, reducing the debt burden for future generations of Irish people.

The strange thing was that this wasn’t universally greeted as a good news story back here in Ireland.

To understand why, you need to look at where the debt arose from in the first place. Anglo Irish Bank was a reckless bank, lending money to property developers in the teeth of a very obvious property bubble. When the bubble finally popped, and the developers ran for cover, Anglo was left with a huge hole in its balance sheet.

Faced with its economy and banking system going into a tail spin, and frozen out of the sovereign debt markets, the Irish Government sought assistance from the EU Commission, the ECB and the IMF. The “Troika” as it became know, agreed to lend the Irish State the money required to keep the lights on, subject a list of conditions, one of which was the the debts of the Irish banks had to be made good by the Irish taxpayer.

And now you see why the good news from last week wasn’t received as such.

For 4 years, since the depth of the Irish banking crisis became known, the Irish media has been telling the Irish taxpayer that they have been greatly wronged by the Troika deal. And its not hard to see what the Irish taxpayer would agree with such analysis.

Anglo Irish Bank was a private bank, that borrowed money from other private banks, and then loaned it to private persons. Where exactly does taxpayer fit into this? Why should the taxpayer have to pick up the tab for the follies of a private bank?

The answer to this would seem pretty straightforward. The bank should be told to go fiddle, and the taxpayers should just go about their business. And for Irish taxpayers who have endured 4 years of budget cutbacks, that answer was a perfect fit.

And that’s why, for many, the news of the deal with the ECB wasn’t good news. For them, the only good news would have been if the Irish Government had told the ECB, and their Troika partners, that they were going to stop paying the Promissory Note altogether, as is suggested by an endless stream of commentators and celebrity economists in Op-Ed pieces and on talk radio shows.

For these people, its a question of morality. The debt had nothing to do with them, so why do they have to pay it back.

And from purely legal and technical perspective they are right. The problem is that if you want to make a moral argument, you have to allow that argument be judged on a moral basis, and the problem for Ireland’s debt rejectionistas, is that there is no moral basis to their argument.

Ireland’s property bubble started around 2002 and popped in 2008. In those years, Irish banks injected a mountain of borrowed money into the Irish economy, primarily into the construction industry.

For example, at the height of the bubble in 2006, Irish property developers built 93k new homes. If the average cost of each home as €200k, and 70k of the 93k homes were loan financed (all conservative estimates) that equates to €14bn loaned into the economy in that year, and that’s for residential development only. You could add another €5bn at least for commercial development.

That’s a huge injection of cash into an economy of 4m people. And its impact was immediate. Wages went up, asset values went up, Government tax revenues went up, public spending went up, capital spending went up, taxes came down, and all over a period of 6 years.

In short, every man, woman and child living in Ireland benefitted from the money that Irish banks, and in particularly Anglo Irish Bank, was lending recklessly into the Irish economy.

It is this point that seems to be eternally lost on those Irish people who continually reject the notion of paying back Anglo’s debt.

What they don’t seem to realise is that it is this point that is foremost in the mind of the Troika, who understand that allowing Irish taxpayers to detach themselves from the debts of the Irish banking system means that other EU taxpayers will have to step into the breach, either through having to make good the debts of the Irish banks, or seeing the value of their savings decline as the ECB pumps money into the eurozone system to cover the debts through inflation.

So on whose side does the moral penny finally fall? Yes, in an ideal world, we could just let the banking system cave in, but in sophisticated credit driven economies, that isn’t an option.

If ultimately, some taxpayers somewhere have to make good the banking debts, is it not just that those taxpayers who benefitted most should be in the vanguard?

The Troika seem to think so.

Twitter goes all cheap on Apache

Are things really that bad in Twitter?

Are things really that bad in Twitter?

Back in April 2012, the Twitter Engineering Group released a blog post in which they announced that they were going to start sponsoring the Apache Software Foundation (ASF), the non-profit group that maintains the world’s most popular Open Source Web Server, Apache, as well as numerous other platforms which form a core part of Twitter’s IT operations.

The blog post makes such grand eloquent statements as:

“Sponsoring the ASF is not only the right thing to do, it will help us sustain our existing projects at the ASF by supporting the foundation’s infrastructure. We have a long history of contributing to Apache projects, including not only Mesos, but also Cassandra, Hadoop, Mahout, Pig and more. As Twitter grows, we look to further our commitment to the success of the ASF and other open source organizations.”

At the time of the announcement, Twitter didn’t specify what level of sponsorship they were going to provide, but given Twitter’s girth in the world of e-Commerce, most people would have presumed that a sizeable donation was in the offing, certainly in at least the Gold Tier of the sponsorship levels that the ASF provides for.

Not so it would seem. A quick glance at the ASF’s web page for current sponsors show the likes of Facebook, Microsoft, Yahoo and Google in the Platinum Tier, but no sign of Twitter.

To find Twitter, we have to scroll all the way down through the Gold and the Silver Tiers to the Bronze Tier, which signifies a donation of just $5,000 (!), where we finally find a reference to Twitter in amongst such Internet Star Destroyers as Two Sigma Investments and Digital Primates.

$5,000?

How many users does Twitter have again? Are things really that bad financially in the world’s largest micro-blogging website?