Wednesday, July 13, 2011

junk bonds


I have only the vaguest notion of what it means when the Irish Times runs a headline like 'Irish debt cut to junk bond status.' If I understand what wikipedia has to say on the matter of junk bonds, then it is something along the lines of speculators being able to invest in Ireland, like a company on the stock market, if they like - but those in the know are saying it's not a very high-risk bet.

Apart from feeling a wee bit insulted by being told we are investment 'junk' I can't help wondering if this whole investment thing is a good idea when it comes to national economies - we're talking about people's lives here; should we really treat them just like any other investment opportunities? Especially when most of the people whose lives they impact have very little idea of what's going on, if they are anything like me. And I'm not all that convinced that the people in government know much more. Didn't the Wright Report, issued not long after the whole Celtic Tiger thing started to collapse, make it clear that the department of finance had hardly any trained economists on staff?

Indeed, whether at national level or for private companies, what are all these 'financial products' that banks and brokers and the ilk come out with? Do we need them ... or are they in reality get rich quick schemes thought up by people who are very bright but ultimately produce nothing of any real value to society? After all, aren't the woes of the world-wide economic meltdown to be laid at the feet of such people ... most of whom remain very wealthy, while the ordinary person in the street groans under the burden of job losses, increased taxes, and government cutbacks?

In which case, the Irish people shouldn't worry about being told their bond status is junk. Just concentrate on producing food and the things that people need to get on with their everyday life. I'm sure those in the know would just shake their heads sadly and say this proves how little I know about economics. I'd be delighted if they could explain it to me.

But for the moment I can't help wondering if this isn't a little bit like what Jesus was talking about in today's Gospel, where he gives thanks to God that even while the so called smart people don't understand him and his message, 'infants' - the plain folk - do. The whole world of 'infants' are starting to cast a very unhappy eye on the so-called smart people who created this mess and seem unable to come up with a solution to it ... other than one where the 'infants' bear the cost. I think the time has come for the smart ones to explain exactly why we should continue to think that they are really smart at all. And why we shouldn't think that this whole financial house of cards they tell us we need isn't junk.

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