2013년 11월 30일 토요일

About 'examples of bad debt'|The 10 Worst Examples Of TSA Abuse







About 'examples of bad debt'|The 10 Worst Examples Of TSA Abuse








"The               decadent               international               but               individualistic               capitalism,               in               the               hands               of               which               we               found               ourselves               after               the               war,               is               not               a               success.

It               is               not               intelligent,               it               is               not               beautiful,               it               is               not               just,               it               is               not               virtuous--and               it               doesn't               deliver               the               goods.

In               short,               we               dislike               it,               and               we               are               beginning               to               despise               it.

But               when               we               wonder               what               to               put               in               its               place,               we               are               extremely               perplexed."               --John               Maynard               Keynes               (1933)Introduction               This               is               the               story               of               the               newly               formed               Irish               Free               State               and               its               early               economic               policies.

It               will               be               argued               that               the               new               realities               of               the               Post-World               War               I               economic               world               exacerbated               a               steadily               declining               British               economic               influence.

In               an               effort               to               retain               world               economic               domination,               Britain               showed               its'               economic               hubris,               (a               time-honored               British               trait)               by               returning               to               an               inflated               gold               standard               in               1925.

In               relegating               much               of               its'               economic               policy               to               Britain's               lead,               the               new               Irish               Free               State               in               tying               its               economy               to               that               of               Britain,               shared               in               its               fate.
               During               the               1920's               the               world               economy               witnessed               a               variety               of               exchange               rate               policies:               America               remained               on               the               gold               standard               throughout               1919-33;               some               countries               (such               as               Britain,               Denmark,               Norway               and               Sweden)               left               gold               during               the               war               or               the               immediate               post-war               period,               returning               to               the               pre-1913               parity               sometime               in               the               mid-1920's;               Belgium,               France               and               Italy               returned               to               gold               in               the               1920's               but               at               a               significantly               depreciated               exchange               rate               relative               to               the               pre-1913               gold               standard               rate;               others,               such               as               Spain,               allowed               their               currencies               to               float,               never               returning               to               a               gold               standard               in               the               1920's.[i]
               The               pre-1913               Gold               Standard               was               viewed               by               the               major               world               economic               powers               as               a               successful               institution               for               Britain               and               the               world               economy               in               general.

This               was               an               important               underlying               factor               in               Britain's               desire               to               return               to               gold               at               the               pre-war               parity               price               of               $4.86.

Many               economic               historians               have               viewed               the               return               to               gold               at               this               parity               price               as               costly               blunder               that               contributed               to               the               relatively               slow               economic               growth               of               the               UK               economy               in               the               "roaring"               '20's.
               The               inter-war               experience               for               Western               economic               policy               makers               included               diverse               exchange               rate               regimes,               free               trade               becoming               increasingly               protectionist,               mass               unemployment,               poor               long-term               economic               growth,               disintegrating               world               trade               and               high               business               cycle               volatility.[ii]               Irish               policy               makers               in               the               first               half               of               the               inter-war               period               had               too               much               on               their               plate               as               it               was               and               stood               back               from               the               economic               fray,               pinning               their               hopes               on               potential               British               success               in               returning               to               world               economic               hegemony.
               Post-War               Irish               Economics
               The               mean               growth               rate               of               real               Gross               National               Product               (GNP)               in               European               countries               in               the               period               1830-1913               was               1.9%.

Ireland               was               at               the               bottom               with               a               still               reasonable               growth               rate               of               0.7%.[iii]               The               primary               reason               for               this               was               that               Irish               agricultural               prices               had               doubled               from               1850               to               1911,               chiefly               due               to               cattle               prices.

The               subsequent               specialization               in               the               production               and               exportation               of               cattle,               and               the               import               of               wheat               (which               declined               in               price               in               the               period)               as               well               as               industrial               goods,               created               a               substantial               gain               in               the               terms               of               trade.[iv]
               The               last               Anglo-Irish               report               from               Dublin               Castle               that               was               published               was               for               the               calendar               year               1918,               dated               1920,               called               Imports               and               Exports               at               Irish               Ports,               1918.

The               trends               are               made               clear               for               the               period               directly               before               the               formation               of               the               Free               State               and               show               impressive               increases               during               the               war               years.

Unfortunately               for               Ireland,               the               disruption               of               trade               post-war               resulted               in               a               permanently               lowered               level               of               world               exports               during               the               1920's               relative               to               1913.[v]
               Total               Irish               Import               and               Export               Trade               (Selected)               (in               £1,000's)               (All               Counties)               [vi]
               Imports               Exports               Deficit/Surplus
               1913               74,467               73,877               590
               1914               73,995               77,311               3,316
               1915               87,950               84,463               3,487
               1916               104,517               107,171               2,654
               1917               119,964               133,780               13,816
               1918               126,081               152,903               26,885
               The               prime               occupation               of               the               new               Irish               state               was               to               legitimize               itself.

Macro-economics               was               generally               seen               as               a               British               problem,               and               before               WW               I,               Britain               was               the               pre-eminent               force               in               world               economics.

This               luxury               of               not               having               to               formulate               much               in               the               way               of               economic               policy               tied               into               the               new               Free               State's               conservative               approach               to               governance.

In               fact,               this               period               can               be               seen               as               something               of               a               laissez               faire               "golden               age"               of               free               trade,               strong               currency,               and               no               foreign               debt               or               budget               deficits.

The               downside               to               not               having               a               pro-active               economic               policy               was               continuing               to               be               a               truly               "captive"               economy.

The               upside               was               that               no               one               in               the               new               Free               State               government               could               be               assigned               active               blame               for               broad               policy               gaffes.
               In               1913,               Ireland               was               not               an               especially               poor               country               by               European               standards               since               its               level               of               income               per               capita               was               somewhat               above               the               European               average.[vii]               This               is               an               important               point,               and               Denmark,               historically               a               frequent               focus               of               comparison,               provides               a               bench-mark               for               that               assertion.

Danish               per               capita               income               was               £44.50               in               1914,               or               only               30%               higher               than               the               Irish               level.

This               put               Ireland               behind               most               European               economies,               but               ahead               of               Sweden               and               Norway,               "reflecting               poorly               on               subsequent               Irish               performance".[viii]
               The               remarkable               thing               about               Ireland               was               that               it               had               one               of               the               highest               growth               rates               of               all               Western               economies               if               taken               as               a               per               capita               number.

Population               in               most               of               Europe               was               rising               while               it               continued               to               fall               steadily               in               Ireland.

That               meant               that               despite               little               economic               growth,               on               the               eve               of               World               War               I,               Ireland               had               an               average               income               per               capita               that               compared               favorably               to               much               of               the               rest               of               Europe.

The               income               level               suggested               a               more               developed               Irish               economy               than               was               in               fact               the               case,               as               agricultural               prices               outperformed               those               of               manufactured               goods               during               the               war.
               In               1920,               the               average               GNP               per               capita               in               the               Southern               Ireland               was               under               60%               of               the               level               in               the               UK.[ix]               GNP               for               the               26               Counties               in               1920               was               £195               million               vs.

£5,266               million               for               the               rest               of               the               UK.

(Feinstein,               p.

10,               Table               1.4)               The               economy               was               quite               small:               the               estimated               revenue               from               taxation               in               1920               was:               taxes               on               expenditure:               £22               million;               taxes               on               income:               £13               million;               and               taxes               on               capital:               £2               million.[x]               In               this               period               the               Irish               Free               State's               conservative               economic               policy               was               coupled               with               a               heavily               promulgated               doctrine               that               prosperity               lay               in               the               development               of               a               healthy               agricultural               sector.

"This               in               turn               could               be               best               achieved               by               concentrating               on               the               export               trade".[xi]
               By               1922,               the               new               Irish               state               was               still               a               small,               generally               agrarian               economy               with               a               long-standing               labor               surplus.

Ireland               began               its               independence               with               no               debt,               substantial               external               cash               reserves,               low               population               density,               a               good               rail               network,               a               British               modeled               banking               system               (and               parity               currency               with               the               English               Pound)               and               a               political               trend               toward               tax               reduction.[xii]               The               first               years               of               the               Irish               Free               State               can               be               seen               as               a               period               of               free               trade,               with               economic               policy               almost               solely               concentrated               upon               raising               efficiency               in               agriculture.

Even               though               there               was               a               desperate               need               to               increase               industrialization,               it               was               swept               under               the               rug               in               favor               of               ensuring               export               markets               for               agricultural               products.

General               government               economic               policy               seemed               to               revolve               around               Patrick               Hogan,               Minister               for               Agriculture,               who               saw               maximization               of               farmers'               incomes               helping               the               broad               economy.

Naturally               the               policy               became               as               a               practical               matter               a               series               of               methods               to               help               farmers               cut               their               costs.

Hence               a               "general               tariff               policy...which               might               benefit               industry"               was               precluded               as               this               could               affect               imported               agricultural               equipment.[xiii]
               The               opposition               party               under               Eamon               de               Valera               (1882-1975),               soon               to               be               a               major               force               in               Irish               politics               called               Fianna               Fail,               did               not               hold               to               this               view,               and               was               more               than               happy               to               rattle               the               sabre               of               punitive               tariffs               if               need               be.

Mr.

Milroy               in               the               Dail,               January,               1924:
               "In               the               case               of               Great               Britain               free               trade               conferred               ample               compensation               for               the               decline               of               agriculture               by               the               stimulus               it               gave               to               the               manufacturing               industry,               which               had               already               made               gigantic               strides               there               as               a               result               of               the               various               advantages               conferred               by               the               numerous               mechanical               inventions,               long               a               monopoly               of               Great               Britain,               and               associated               with               the               so-called               industrial               revolution.....

Had               the               other               countries               been               unable               to               erect               protective               barriers               against               competition               from               Great               Britain               they               would               have               found               themselves               long               ago               in               the               position               occupied               by               Ireland               to-day,               that               is,               industrial               derelicts.

Protection               saved               them,               both               agriculturally               and               industrially.

Free               trade               meant               the               ruin               of               British               agriculture,               but               it               also               meant               the               making               of               British               industrial               greatness.

Free               Trade               meant               ruin               to               Irish               agriculture               and               Irish               industry.[xiv]
               Hogan               instituted               the               policy               of               raising               standards               in               farming               to               spur               economic               growth.

But               this               did               not               help               the               prices               of               Irish               agricultural               products               to               rise,               because               of               course               the               global               economy               set               the               prices               and               they               were               peaking.

The               total               value               of               agricultural               exports               reached               a               peak               of               £51.6m               in               1924               but               fell               back               to               £42m               in               1926.[xv]               In               1926,               agriculture               as               a               whole               provided               54%               of               all               employment               and               35%               of               Gross               Domestic               Product               in               the               Free               State.

[xvi]               Exports               of               food               and               drink               amounted               for               85%               of               total               merchandise               exports.

[xvii]               Britain               was               indeed               a               huge               market,               but               agricultural               prices               were               dropping               world-wide,               so               to               grow,               Irish               productivity               must               be               improved,               as               it               would               have               the               effect               of               reducing               farming               costs               so               that               Irish               export               sales               would               be               competitive               and               farm               incomes               would               rise.

Britain               was               very               aware               of               the               Irish               economy               as               its               consumers               imported               6%               of               the               total               exports               of               Britain.

Being               one               of               Britain's               largest               single               markets               it               was               as               a               necessity               closely               watched               and               shepherded               in               this               period.
               In               the               inter-war               period               Irish               trade               can               be               seen               as               the               story               of               Irish               agriculture.

Ireland               was               completely               dependant               upon               trade               to               the               UK               for               its               agricultural               products.

The               slow               growth               (i.e.

demand)               in               the               UK               was               just               the               beginning               of               an               ugly               story:               The               Irish               Civil               War               had               affected               production,               and               very               poor               harvests               in               1923               and               1924               just               exacerbated               the               collapse               in               post-war               prices.

The               agricultural               output               price               index               to               base               (1911-13               =               100),               fell               from               288               in               1920,               to               160               in               1922,               and               by               1931               had               reached               110.[xviii]               The               truth               is               that               there               was               little               or               no               progress               in               increasing               agricultural               growth               in               this               period.

"The               value               of               net               output,               the               closest               proxy               for               farm               incomes               at               this               time,               was               5               percent               less               in               1929/30               than               in               1924/5."[xix]               The               trend               in               Ireland's               share               of               the               British               market               for               main               agricultural               products               confirms               this               impression.

Butter's               share               rose               from               8.7%               in               1924               to               9.1%               in               1928;               yet               eggs               fell               from               23.1%               to               19.6%;               and               cattle               fluctuated               year               to               year               registering               no               sustained               increases.[xx]
               UK               Trade               with               Four               Agricultural               Economies               1924               and               1930[xxi]
               Ireland               New               Zealand               Denmark               Netherlands
               Imports               as               a               %               of               all               UK               Imports
               1924               4.4               3.5               4.3               3.7
               1930               4.4               4.2               5.6               4.0
               Exports               as               a               %               of               all               UK               Exports
               1924               5.9               2.5               2.9               3.2
               1930               6.0               3.1               3.0               3.3
               As               late               as               1928,               de               Valera               was               bemoaning               the               lack               of               Irish               trade               outside               of               Britain.
               "We               would               like               to               know               what               are               the               trade               activities               of               these               representatives               of               ours               abroad?

How               far               have               they               been               able               to               increase               the               direct               trade               between               Ireland               and               the               countries               where               these               representatives               are?

Looking               through               the               trade               reports               we               find               very               little               advance.

There               is               some               advance,               but               it               is               very               little,               and               we               wonder               whether               the               Department               of               External               Affairs               is               really               active...Is               there               any               possibility               of               our               getting               alternative               markets               on               the               Continent               which               will               put               us               in               a               better               bargaining               position               than               we               are               in               at               the               present               moment               with               respect               to               Great               Britain?

These               are               questions               we               would               like               to               get               an               answer               to."               [xxii]
               The               Irish               Free               State               teetered               on               the               edge               of               bankruptcy               through               1923,               as               belatedly               paid               costs               of               the               Civil               War               mounted.

In               England,               Bonar               Law's               government               felt               it               necessary               to               provide               the               financial               backing               to               keep               the               Free               State               afloat.

Treasury               officials               prodded               Irish               banks               to               buy               Irish               securities.

In               fact               the               directors               of               the               Bank               of               Ireland               were               in               direct               and               frequent               contact               with               the               Treasury               in               this               period.[xxiii]               The               truth               is               that               Britain               needed               a               relatively               healthy               Ireland               to               buy               British               goods               in               a               period               of               very               high               UK               unemployment.
               "During               1921               British               policy               towards               Ireland               had               been               formulated               at               the               highest               level               of               the               Cabinet.

After               the               Treaty               this               was               no               longer               the               case."[xxiv]               However               it               canbe               said               that               Anglo-Irish               financial               relationships               were               still               quite               strong               even               so.

London               and               Dublin               both               wanted               to               ensure               the               success               of               the               Free               State.

The               relationship               was               "close               and               cordial               in               those               matters               where               both               Irish               and               British               representatives               believed               their               individual               interests               to               be               identical".[xxv]
               The               years               following               the               creation               of               an               independent               Irish               Free               State               were               a               formative               period               for               the               Irish               banking               system.

It               was               generally               accepted               that               the               Irish               bank's               links               with               London,               and               the               commitment               to               maintain               parity               with               the               sterling,               ruled               out               an               independent               monetary               policy.

"This               argument               was               reinforced               by               the               virtual               absence               of               a               domestic               money               or               capital               market,               and               only               the               first               tentative               steps               in               the               development               of               such               markets               were               made               during               the               inter-war               period."[xxvi]
               The               UK:               Gold               Standard               and               Sterling               Valuation
               The               gold               standard               had               connotations               of               almost               mythic               proportions               in               the               inter-war               period.

The               virtues               of               the               pre-war               gold               standard               were               almost               never               questioned               in               polite               economic               circles.

Both               the               Genoa               and               Brussels               Conferences               of               1920               and               1922               stressed               the               urgency               of               returning               to               fixed               gold               parities.[xxvii]               Unfortunately               there               was               no               negotiated               international               settlement               with               regard               to               currency               stabilization.

As               a               result               unilateral               actions               precipitated               disaster.

Countries               acted               independently,               and               pegged               their               monitary               rates               at               different               times               in               the               1920's.[xxviii]               Only               a               few               countries,               including               the               UK,               The               Netherlands,               Denmark,               Norway               and               Sweden,               pegged               their               currency               to               the               old               pre-war               parities:               most               opted               for               a               devalued               rate               more               closely               aligned               with               the               interwar               economic               reality.[xxix]               Additionally,               France               was               extremely               wary               of               an               Anglo-American               economic               domination               and               refused               to               discuss               monetary               policy               at               all.

The               most               glaring               examples               of               the               disequilibrium               that               resulted               were               the               general               undervaluation               of               the               French               and               Belgian               currencies               and               the               overvaluation               of               Sterling               and               Scandinavian               currencies.
               Realignment               of               the               World               Economy
               Prosperity               in               Europe               was               increasingly               dependant               on               a               strong               American               economy,               and               the               continued               flow               of               credit.[xxx]               As               America               grew               stronger,               European               influence               in               the               world               diminished               and               economies               remained               fragile.

From               1913-1929               Europe's               share               of               world               manufacturing               production               fell               from               37.5               to               29.5%.[xxxi]
               Post               WW               I,               England               had               overcapacity               in               many               primary               industries.

Iron               and               steel,               textiles,               and               most               particularly               coal,               suffered               sharp               drops               in               demand.

"The               most               extreme               manifestation               of               the               structural               problem               was               to               be               found               in               Britain               where               export               losses               in               traditional               products               were               severe".[xxxii]               Britain's               share               in               world               exports               declined               in               the               period               1913-1929               from               13.9%               to               only               10.8%.[xxxiii]               It               should               be               noted               that               some               smaller               countries               such               as               Denmark               gained               market               share               in               the               period.

The               European               content               of               Britain's               trade               was               low               by               continental               standards,               one-third               vs.

the               more               common               one-half               for               other               countries               trading               partners.

The               remaining               pieces,               primarily               Asia               and               the               dominions,               were               down               significantly               to               American               inroads.
               Exchange               rate               policy               is               a               major               device               by               which               a               country               can               increase               its               economic               competitiveness               internationally,               and               there               was               spirited               debate               in               Britain               on               the               return               to               the               gold               standard               as               an               extension               of               this               policy.

In               Parliament,               Winston               Churchill               argued               forcefully               for               adoption               of               the               gold               standard.

John               Kenneth               Galbraith,               in               Money               wrote               of               the               speech:
               "His               address               to               Parliament               on               28               April               1925               announcing               the               return               to               gold               was               a               Churchillian               occasion.

The               self-governing               dominions,               he               observed,               had               moved               or               were               moving               to               re-establish               the               gold               standard,               so               over               the               whole               of               the               British               Empire               there               would               be               'complete               unity               of               action'.

The               success               of               the               step               was               being               ensured               by               American               support               -               $200               million               from               the               Federal               Reserve               Bank               of               New               York,               $100               million               from               J.

P.

Morgan.

The               consequence               would               be               a               great               revival               in               international               and               intra-imperial               trade.

Hence-forth               nations               united               by               the               gold               standard               would               'vary               together,               like               ships               in               harbor               whose               gangways               are               joined               and               who               rise               and               fall               together               with               the               tide'".[xxxiv]
               Meanwhile,               a               short               time               later               in               "The               Economic               Consequences               of               Mr.

Churchill",               John               Maynard               Keynes               published               a               long               attack               on               Britain's               return               to               the               gold               standard               in               which               he               argued               that               Britain               had               returned               to               the               gold               standard               at               too               high               a               parity.

He               suggested               that               committing               to               the               pre-war               parity               (while               many               nations               had               already               substantially               devalued               their               currencies)               would               ultimately               prove               deflationary               and               retard               employment               and               growth.

It               is               interesting               to               note               that               the               financial               community               was               virtually               unanimous               in               favor               of               a               return               to               the               gold               standard.

Nonetheless,               Keynes               analysis               proved               to               be               the               correct               one.

Economic               historians               are               in               wide               agreement               that               the               return               to               the               gold               standard               in               1925               overvalued               sterling               by               approximately               10               percent               relative               to               the               dollar.
               The               theory               of               purchasing               power               parity               (PPP)               begins               with               the               premise               that,               in               equilibrium,               a               flexible               exchange               rate               reflects               movements               in               relative               prices               between               countries.

If               UK               prices               rise               10               percent               relative               to               US               prices,               (reducing               UK               competitiveness)               to               maintain               equilibrium               in               international               accounts               the               Pound               Sterling               would               be               expected               to               depreciate               relative               to               the               dollar               by               10%.[xxxv]               The               "mint               parity"               between               the               U.S.

dollar               and               sterling               was               approximately               $4.87,               based               on               a               U.S.

official               gold               price               of               $20.67               per               ounce               and               a               U.K.

official               gold               price               of               £4.24               per               ounce.

The               sterling/dollar               exchange               rate               would               not               fluctuate               beyond               the               "gold               points"               (about               three               cents               above               and               below               the               mint               parity)               which               represented               the               cost               of               shipping               and               insuring               gold,               since               at               any               exchange               rate               outside               the               gold               points               it               would               be               possible               to               gain               an               arbitrage               profit               by               converting               currency               into               gold               and               shipping               the               gold               to               the               other               center.
               English               goods               which               had               been               priced               at               eighteen               shillings               in               foreign               markets               now               cost               twenty               shillings               -               a               full               Pound.

This               handicapped               all               British               exporters;               some               became               hopelessly               crippled.

The               owners               of               British               collieries               could               not               compete               with               German               and               American               coal               if               they               charged               higher               rates.

Their               only               alternative               was               to               cut               their               miners'               wages.

That               was               fraught               with               peril               and               an               ominous               cloud               soon               appeared.

Coal               mining,               Britain's               basic               industry,               was               also               the               most               highly               organized               and               politicized.

The               miners'               union               protested               the               drop               in               pay.

Stop-gap               subsidies               to               the               mine               owners               bought               nine               months               of               labor               peace,               but               the               outlay,               which               was               first               estimated               at               £10               million               but               ultimately               became               £23               million,               was               unacceptably               exorbitant.

The               strike               began               in               May               1926,               and               before               it               ended               it               would               cost               over               £800               million               to               the               English               government.[xxxvi]
               Indeed,               the               British               continued               to               pay               the               price               in               higher               interest               rates,               a               general               economic               slowdown,               stifled               imports               and               millions               more               people               out               of               work.

An               improvement               in               exports,               which               was               the               object               of               the               game,               never               materialized               as               trade               started               to               dry               up               worldwide.

Worse               still,               the               UK               underperformed               many               other               economies               substantially               in               the               period               (1925               to               '29               in               particular):               
               
               Volume               of               Gross               Domestic               Product               (1913               =               100)[xxxvii]
               1918               1919               1920               1921               1922               1923               1924               1925               1929
               Germany               82.0               72.3               78.6               87.5               95.2               79.1               92.6               103.0               121.3
               France               63.9               75.3               87.1               83.5               98.5               103.6               116.6               117.1               134.4
               Italy               133.3               111.0               101.3               99.8               104.9               111.3               112.4               119.8               131.1
               Denmark               93.8               105.9               110.9               107.7               118.6               131.1               131.5               128.5               153.0
               Switzerland               89.4               95.3               101.5               99.0               108.5               114.8               119.1               127.8               154.5
               UK               113.2               100.9               94.8               87.1               91.6               94.5               98.4               103.2               111.9
               Back               in               Ireland
               In               Ireland,               confusion               reigned.

The               following               discussion               between               the               Minister               for               Finance,               Mr.

Ernest               Blythe               (also               the               V.P.

of               the               Executive               Council)               and               Mr.

Thomas               Johnson               (co-founder               of               the               Irish               Labour               Party,               and               General               Secretary               of               the               Irish               TUC)               speaks               volumes               for               the               economic               naiveté               of               Ireland               in               the               period:
               Mr.

Johnson:               "I               beg               to               ask               the               Minister               for               Finance...Whether               his               attention               has               been               drawn               to               an               announcement               made               in               the               British               House               of               Commons               by               the               Chancellor               of               the               Exchequer               in               respect               of               the               re-establishment               of               the               gold               standard               and               free               market               for               gold;               and               if               it               is               the               intention               of               the               Executive               Council               to               take               any               steps               to               re-establish               a               gold               basis               for               Irish               bank               notes               and               provide               a               gold               reserve               in               Saorstat               Eireann?"
               Mr.

Blythe:               "My               attention               has               been               drawn               to               the               announcement               referred               to               by               the               Deputy,               but               as               the               announcement               appeared               only               in               yesterday's               papers,               and               as               the               terms               of               the               Bill               in               which               it               is               proposed               to               embody               the               impending               charges               are               not               yet               available,               I               am               not               in               a               position               as               yet               to               give               consideration               to               the               matters               referred               to               by               the               Deputy."
               Mr.

Johnson:               "Has               the               Minister's               attention               been               drawn               to               the               statement               that,               so               far               as               the               Self-Governing               Dominions               are               concerned,               there               shall               be               complete               unity               of               action,               and               that               the               Dominions               of               Canada,               South               Africa,               Australia,               and               New               Zealand               are               all               to               be               brought               into               the               agreement,               and               whether               any               communication               was               made               in               the               matter               to               the               Executive               Council,               and               whether               they               were               included               in               this               general               agreement?"
               Mr.

Blythe:               "No,               sir,               and               I               presume               it               was               not               necessary,               as               we               have               no               separate               currency."
               Mr.

Johnson:               "Is               there               no               necessity               for               having               a               substantial               basis               for               Irish               currency?"
               Mr.

Blythe:               "There               is               no               Irish               currency."
               Mr.

Johnson:               "Are               not               bank               notes               currency?"
               Mr.

Blythe:               "They               are               not               legal               tender."
               Mr.

Johnson:               "Are               Treasury               notes               currency?"
               Mr.

Blythe:               "Some,               perhaps."
               Mr.

Johnson:               "Then               we               have               no               gold               and               we               have               only               silver               and               copper,               and               we               have               bank               notes               which               are               not               legal               tender.

Is               that               the               position?

We               have               no               legal               tender?"
               Mr.

Blythe:               "I               think               there               is               some               legal               tender               in               the               country.

However,               that               is               a               legal               question."
               Mr.

Johnson:               "We               are               in               a               very               bad               way               if               there               is               no               legal               tender               except               silver               and               copper."[xxxviii]
               If               Ireland's               exports               went               predominantly               to               the               UK,               then               Ireland,               paid               in               sterling,               was               placed               in               a               vicious               cycle               of               exporting               to               a               market               that               paid               in               an               uncompetitive               world               currency.

Ireland               tried               to               find               othermarkets,               but               their               sterling               denominated               goods               were               too               pricey.

It               follows               that               if               an               overvalued               sterling               had               a               deflationary               effect               on               Britain,               it               must               have               the               same               effect               on               Ireland.

Overall               the               logic               of               maintaining               the               link               with               sterling               in               the               inter-war               years               was               compelling,               because               of               the               aforementioned               mutually               beneficial               trade,               but               also               because               British               and               Irish               capital               and               labor               markets               were               closely               integrated.[xxxix]
               Ireland               benefited               from               an               amalgamated               currency               with               Britain               from               1826               until               1928,               and               continued               when               the               Saorstat               Pound               was               pegged               at               one-to-one               parity               with               sterling.

PPP               theory               predicts               that               given               the               small               size               of               the               Irish               economy               in               relation               to               the               UK,               the               Irish               price               level               (or               the               inflation               rate)               would               in               large               part               be               determined               by               the               UK               price               level               for               as               long               as               the               fixed               exchange               rate               was               maintained.[xl]               In               the               debate               on               the               Coinage               Bill               in               January               of               1926,               this               interesting               exchange               took               place               on               the               relatively               high               sterling               valuation               and               the               direct               effect               on               Ireland               (albeit               with               no               mention               of               trade):
               Mr.

Heffernan:               "Then               I               will               say               that               the               British               Government               is               the               only               Government               of               any               belligerent               country               which               maintained               its               currency               free               from               unreasonable               depreciation.

Our               investors               who               have               invested               money               to               the               extent               of               £200,000,000               in               England               have               good               reason               to               be               thankful               to               those               in               charge               of               financial               affairs               in               Great               Britain.

The               effect               of               a               depreciated               currency               in               England               would               be               to               rob               those               in               this               country               who               depend               largely               on               the               incomes               derived               from               investments               in               England.

If               British               currency               depreciated               it               would               mean               that               Irish               investors               would               be               robbed               of               something               approximating               to               about               £10,000,000               a               year."
               Mr.

Johnson:               "Then               you               would               get               some               cheap               food."
               Mr.

Heffernan:               "They               would               have               nothing               to               pay               for               the               food               with.

There               is               one               fact               which               I               am               sure               Deputy               Johnson               is               not               slow               to               appreciate,               and               that               is,               that               it               is               well               known               that               wages               always               lag               behind               depreciation.

Wages               hardly               ever               rise               as               quickly               as               currency               depreciates,               and               any               advantage               which               a               country               which               depreciates               its               currency               gains               is               gained               at               the               expense               of               the               worker.

The               worker               works               for               a               lesser               real               wage,               though               larger               nominally,               than               the               worker               in               the               country               in               which               the               currency               is               not               depreciated.

That               is               one               of               the               difficulties               which               England               has               found               in               maintaining               her               position               in               the               world's               market-of               paying               a               wage               according               to               the               real               value               of               her               currency               as               against               countries               where               the               currency               has               been               depreciated."               [xli]
               There               was               no               serious               effort               to               break               from               British               monetary               and               economic               policy,               although               true               to               form               there               was               a               certain               distrust               of               motives.

In               the               Dail               debate               of               April               7,               1927               on               the               Currency               Bill               (instituting               a               new               Irish               currency,               the               Saorstat               Pound               at               parity               to               sterling),               Ernest               Blythe,               Minister               for               Finance,               started               out               this               exchange:
               "There               is,               in               this               country,               a               fairly               general               ignorance               of               everything               relating               to               banking               and               currency               and               credit.

Then               there               are,               perhaps,               more               people               in               this               country               than               in               most               countries               who               would               be               quite               willing               to               create               a               panic               where               there               was               no               need               for               panic.

In               all               countries,               at               the               present               time,               there               is               knowledge               of               the               ill-effects               that               may               follow               an               unsound               currency               policy.

Happenings               in               certain               European               countries               after               the               war               have               brought               home               to               people               the               fact               that               an               unsound               currency               policy               must               produce               very               serious               results."
               T.J.

O'Connell:               "I               am               not               quite               so               sure               that               British               financial               policy               is               always               operated               in               the               interests               of               British               prosperity.

Within               the               past               few               years               we               have               had               several               financiers               of               high               repute               who               have               expressed               very               grave               doubt               as               to               the               wisdom               of               the               British               financial               policy               during               late               years,               especially               since               the               war.

It               has               been               asserted               that               the               policy               of               rapid               deflation               is               responsible               for               many               of               Britain's               industrial               ills               at               the               present               time...I               think               it               is               too               easily               taken               for               granted               that               it               should               of               necessity               be               linked               up               with               the               British               system               and               that               there               is               no               possibility               of               exploring               any               other               avenue               except               in               that               direction.

Whatever               may               be               said               on               that               point,               we               may               be               quite               sure               that               the               financial               policy               of               Britain               will               always               be               governed               rather               by               British               needs               than               by               Irish               needs.

There               is               no               doubt               about               that,               and               it               is               doubtful               whether               it               has               always               even               been               operated               in               the               interests               of               British               prosperity               itself               and               British               needs."
               Mr.

Heffernan:               "I               agree               that               the               Minister               was               wise               in               anchoring               our               monetary               standard               of               value               to               the               English               pound               sterling,               because               in               the               conditions               that               exist               in               this               country-a               certain               lack               of               stability               and               lack               of               confidence               in               ourselves               and               in               our               Government-it               is               advisable,               for               the               present,               at               least,               that               we               should               maintain               confidence               in               our               monetary               standard,               by               keeping               it               at               par               with               the               English               pound               sterling."
               Mr.

Johnson:               "Are               we               to               assume               that               the               financial               policy               and               the               currency               policy               of               an               industrial               community,               depending               to               a               very               great               extent,               as               it               does,               upon               finding               markets               for               its               industrial               commodities               abroad,               is               and               must               be               always               identical               with               that               of               an               agricultural               country               which               is               not               exporting,               to               any               great               degree,               manufactured               commodities               and               may,               as               I               hope,               be               to               a               much               greater               extent               in               the               near               future               more               self-contained               than               it               has               been               up               to               now,               that               it               will               consume               very               much               more               of               its               own               agricultural               produce,               relying               less               rather               than               more               on               the               international               trade               between               England               and               Ireland?

I               say               that               we               should               not               assume               that               for               ever               there               is               going               to               be               this               necessity:               that               the               two               financial               policies               and               the               two               currencies               of               the               several               countries               must               be               identical.

I               think               it               is               right               to               say,               and               I               have               no               doubt               it               will               be               the               position               for               quite               a               considerable               time,               that               we               should               not               attempt               to               interfere               at               this               stage               of               our               history               with               that               position."[xlii]
               And               again               two               years               later,               Mr.

Blythe               on               consideration               of               the               Bank               of               Ireland               Bill:
               "There               is               no               such               thing               as               financial               independence.

There               is               financial               interdependence               if               you               like,               but               I               think               it               is               altogether               putting               a               wrong               view               of               the               position               to               suggest               that               under               the               system               which               is               now               coming               into               full               operation               in               this               country               we               are               under               the               control               of               the               Bank               of               England.

If               the               Bank               of               England               or               the               British               Government               departed               from               the               gold               standard-although               that               is               not               a               stable               thing,               but               it,               apparently,               is               the               most               stable               which               could               be               found-               then               we               would               have               to               reconsider               our               position               here,               and               reconsider               our               legislation.

As               long               as               they               retain               the               gold               standard,               it               seems               to               me               that               our               financial               independence               is               as               great               as               it               could               be               under               any               system."[xliii]
               Had               international               economic               conditions               been               better,               perhaps               things               might               have               been               different,               but               the               reality               was               that               real               prices               (and               therefore               wages)               in               agriculture               declined               in               the               period,               and               as               agricultural               protectionism               and               a               dramatic               slowdown               of               growth               occurred               in               the               UK,               Irish               under-development               relative               to               Europe               became               entrenched.

Agricultural               wage               trends               show               no               growth               in               real               wages               in               the               period.

Farm               labor               continued               to               be               very               poorly               paid:
               Agricultural               Wage               Trends               1923-33[xliv]
               Year               Cash               Wage               (s.

d.)               Half-Yearly               Wage               (£.

s.)
               ________________________________________________________
               1923               28               6               16               10
               1924               26               3               14               13
               1925               25               3               14               2
               1926               25               0               14               18
               1927               23               6               13               17
               1928               23               6               13               14
               1929               23               6               13               14
               1930               24               6               14               7
               1931               24               3               14               1
               1932               23               6               13               15
               1933               22               3               12               13
               There               can               be               no               wonder               at               all               that               emigration               from               Ireland               remained               at               a               high               level               throughout               the               inter-war               period.

The               post               World               War               I               economy               has               remained               to               most               historians               one               of               initial               hope               ending               in               despair,               as               the               attempted               re-creation               of               pre-war               economic               stability               ultimately               failed.[xlv]
               Summation:               Stability               vs.

Development
               Despite               some               misgivings,               Ireland               chose               economic               linkage               with               Britain.

But               in               a               period               where               an               ebbing               tide               lowers               all               ships,               was               this               the               best               policy               for               developing               a               new               nation?

Opting               for               the               stability               of               sterling               perpetuated               trading               links               with               a               British               market               which               did               not               exhibit               inter-war               growth.

The               costs               of               currency               risk               and               foreign               exchange               transactions               (particularly               with               undercapitalized               Irish               banks)               represented               barriers               to               Irish               exporting               enterprises               who               might               otherwise               have               established               trading               relationships               with               continental               Europe               and               elsewhere.

Had               trading               with               the               UK               been               subject               to               the               same               costs               more               enterprises               would               have               incurred               the               fixed               costs               of               learning               how               to               deal               with               foreign               exchange               and               would               then               have               benefited               from               a               more               dynamic               market.[xlvi]               But               the               politically               palatable               continuation               of               a               no-margin,               one-for-one               link               with               sterling               involved               no               greater               financial               complexity               than               that               of               any               internal               Irish               trade.

So               there               can               be               seen               to               be               an               opportunity               cost               of               not               needing               international               trade               enough               to               learn               how               to               go               about               it,               and               institute               the               necessary               internal               structures.
               Newly               independent               countries               often               see               an               autonomous               currency               as               an               essential               symbol               of               their               sovereignty.

Yet               in               the               Ireland               of               the               1920's,               the               temptation               to               abandon               sterling               for               political               reasons               was               resisted.

So               as               a               "captive"               economy,               Ireland               was               tied               to               a               monitarily               overvalued               mother-country               economy               that               performed               worse               than               its               peers.

"There               is               no               doubt               that               the               exchange               rate               policy               of               returning               to               the               pre-1913               gold               parity               constrained               [UK]               economic               performance               during               the               1920's".

[xlvii]               And               thus               was               the               new               Irish               Free               State               destined               to               come               out               of               the               gates               as               a               sovereign               nation               hobbled               by               economic               co-dependency.
               Primary               Sources
               "Report               on               the               Trade               in               Imports               and               Exports               at               Irish               Ports               during               the               year               1918,               1/22/1920"               Enhanced               British               Parliamentary               Papers               on               Ireland               1801-1922.

Crown               copyright:               Controller               of               HMSO               and               the               Queen's               Printer               for               Scotland;               University               of               Southampton,               2003.
               Keynes,               John               M.

The               Economic               Consequences               of               Mr.

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London,1925.
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'National               Self-Sufficiency',The               Yale               Review,               Yale               New               Haven               Press,               Summer               1933.
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The               Economic               Consequences               of               the               Peace.

London,               Macmillan,               1920.
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Dundalgan               Press,               IRELAND
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"The               Last               Lion:               Winston               Spencer               Churchill               Visions               of               Glory               1874-1932"               Sphere               Books               Ltd,               1984.
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(ed.)               The               World               Economy               and               National               Economies               in               the               Interwar               Slump.

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Themes               in               Macroeconomic               History:               The               UK               Economy,               1919-
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               Endnotes
               [i]               Solomou,               17-30
               [ii]               Ibid.,               159
               [iii]               O'Grada,               44
               [iv]               Kennedy,               20
               [v]               Solomou,               22
               [vi]               "Report               on               the               Trade:               Imports               and               Exports               at               Irish               Ports,               1/12/1918",               vi
               [vii]               Kennedy,               et.

al.,               13-15
               [viii]               O'Grada,               380
               [ix]               Kennedy,               21-2
               [x]               Feinstein,               73
               [xi]               Kennedy,               et.

al.,               221
               [xii]               Fanning,               140
               [xiii]               Aldcock,               112
               [xiv]               Dail               Eireann,               Volume               6,               (16               January,               1924)               201
               [xv]               Lee,               113
               [xvi]               O'Hagan,               28
               [xvii]               Kennedy,               et.al.,               35
               [xviii]               Ibid.,               37
               [xix]               Ibid.,               37
               [xx]               O'Grada,               cit.

Irish               Statistical               Abstract;               392
               [xxi]               Ibid.,               414
               [xxii]               Dail               Eireann,               Volume               27,               (21               November,               1928)
               [xxiii]               Canning,               78
               [xxiv]               Ibid.,               12
               [xxv]               Ibid.,               128
               [xxvi]               O'Grada,               412
               [xxvii]               Aldcroft,               32
               [xxviii]               Ibid.,               33
               [xxix]               Ibid.,               cit.

League               of               Nations               (1946)               92
               [xxx]               Ibid.,               44
               [xxxi]               Ibid.,               13
               [xxxii]               Ibid.,               40
               [xxxiii]               Ibid.,               96
               [xxxiv]               Galbraith,               174
               [xxxv]               Solomou,               34
               [xxxvi]               Manchester,               568-70
               [xxxvii]               Aldcock,               75,               cit.

Maddison               (1995)               148-50
               [xxxviii]               Dail               Eireann,               Volume               11,               (30               April,               1925)
               [xxxix]               O'Grada,               428
               [xl]               O'Hagan,               180
               [xli]               Dail               Eireann,               Volume               14,               (27               January,               1926)
               [xlii]               Dail               Eireann,               Volume               16,               (April               7,               1927)
               [xliii]               Dail               Eireann,               Volume               20,               (April               18,               1929)
               [xliv]               O'Grada,               cit.

Irish               Statistical               Abstract;               (May               1930)               116-7
               [xlv]               Aldcroft,               30
               [xlvi]               O'Grada,               214
               [xlvii]               Solomou,               49






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