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Marc Coleman: A year of strangeness is truly upon us

'The lamps are going out all over Europe. We shall not see them lit again in our time". Edward Grey's warning in 1914 was echoed after the end of the Great War by Yeats warning of anarchy, blood-dimmed tides and revelations at hand. Earthquakes shake our houses. Strange lights fill our northern skies. To say a year of strangeness and destiny is upon us seems no exaggeration at all.

A stranger event still occurred in Trinity College Dublin last Monday. Anti-Lisbon Treaty campaigner and right-leaning Declan Ganley agreed with radical Green Europhile and former German Foreign Minister Joschka Fischer that not only must Europe and the euro be saved, but strengthened. President Higgins's call for a fundamental debate on where we are going was another sign of epoch-making times.

And he went on to show just how much we need one. Like Fischer on Monday, the President blamed "unrestrained markets" and "capitalism", the philosophy of Friedrich Hayek, for the current global crisis. But as two strident examples of what market capitalism is not about, the decision of presidents Carter in 1977 and Clinton in 1999 to force US banks to lend sub-prime mortgages to those who could not afford them are hard to beat. And that intervention is the root cause of almost all that went wrong. Likewise, the failure of Democrat and Republican politicians, who received generous campaign donations from Fannie Mae, to rein in its reckless lending in the US housing market. Nor would Hayek have had any sympathy for Anglo Irish bondholders: the decision -- taken by politicians -- to foist their losses on the shoulders of taxpayers was the very opposite of free market principles he espoused. Sure, the Taoiseach was right to note that greed played a role in the crisis. But politically motivated governments distorting economies with interventionist policies played an even bigger one.

This matters: if our diagnosis is wrong, our solutions will be wrong too and the euro's collapse will be the result. That is a prospect so awful that it terrifies even the bitterest British Eurosceptic. As Fischer put it: "The British will face disaster because the City of London depends more on the euro than the pound. That's the dirty little secret of the British." Fischer also warned that the consequences for Ireland of rejecting a euro referendum would be "extreme". And there will be no second vote.

Much though I hate to disagree with our esteemed President, on Hayek, I have to. Far from being discredited, Hayek is our inspiration now. It was he who showed how state intervention -- the US Fed and Bank of England setting ultra-low interest rates in the Twenties -- contributed to the Great Depression, and how, far from causing recovery, Keynesian economics resulted in the US economy sliding back into recession in the late Thirties. Likewise, low interest rates and sub-prime mortgages a decade ago caused this crisis. Last week's temporary pick-up in US growth is less a sign of recovery and more a sign that quantitative easing has moved from being a needed and justifiable tool to save the US financial system to an unsustainable counter-productive tool for pump-priming US domestic demand.

Hayek shone a beacon against the forces of state tyranny, forces that led ultimately to totalitarianism, evil and war. Fischer noted on Monday how the National Front in France is once again peddling this toxic concoction. We should not give them succour, intellectual or otherwise.

Thus far, Ireland has held fast to the principles of vigilance in the defence of liberty. Our re-entry into bond markets last week salutes this approach. So does the US Heritage Foundation's rating of Ireland as a free economy. Even if you don't like the Heritage Foundation, the point here is practical, not ideological: look at our competitive, low-tax multinationals and high export growth. Now look at our protected, high-tax, stagnant domestic economy. Now tell me whether Hayek or Keynes is right. And had Italy, Greece and Spain followed Brian Lenihan's rapid, if misguided, courage, the world would be a safer place right now.

The world over, political distortion of economics and big government is failing. To see an example,

take Ireland, go back four years, multiply the result by 100 and move it 5,000 miles to the east. Tens of billions of dollars are leaving China's banking sector, as overinflated property prices begin to unwind. State intervention -- which stopped Chinese consumers from spending money on European and US goods -- has made global growth hard to sustain. And it has channelled funds into indebted state enterprises. When US quantitative easing ends, as it must, Chinese exports could plunge, unleashing a tsunami across the Pacific economy.

Thankfully, our export performance remains robust, heroic even. Like a bicycle in a traffic jam, we are still small and agile enough to outperform a stalled world economy. But if we lose our precious multinational sector, the lamps really will go out. Last Wednesday Obama -- the man we cheered last May -- echoed the protectionism of the Thirties and opened up a second front in our corporation tax war. In his State of the Union address he announced he wants US multinationals to come home and will change US tax law to do it.

Elsewhere, Iran makes progress towards nuclear status. In Syria, anarchy is loosed upon a corrupt regime. In Egypt, fundamentalists are surging to power, ending four decades of peace between it and Israel. When I visited Israel last May, my tour guide told me there would be war in the Middle East "within two years". Almost unnoticed, thousands of US troops are deploying in Israel for what some believe is preparation for an attack on Iran. As Yeats's Second Coming asks: "What rough beast, its hour come round at last, slouches towards Bethlehem to be born?"

If ever there was a time for steady hands and clear minds in the affairs of the world, it is now.

Follow @marcpcoleman and listen to Marc on 'Coleman at Large', Tuesday and Wednesday at 10pm, on Newstalk 106-108fm

Sunday Independent