The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[orangeman]

Can anyone explain why the dollar is gaining so much strength versus the £ and the € ??

[Gnevin]

Don't Republicans also have a model where foreign debt with ultra lower interest rates are  inflated away to be meaning less. So they get a loan of 1 bl in 1990 at .25% with in inflation that 1bl is now worth half as much if that makes sense?

[Lone Shark]

It absolutely galls me that the government are doing this but it is a necessary evil because we have gone so far down the road of corruption, greed and under handedness that we cannot turn away from it immediately without dire consequences. Joe Higgins' (someone I wouldn't be inclined to agree with all that often) piece earlier on this thread was hard to argue with. A touch exaggerated it could be argued in parts but a damning indictment on our so called democracy and economic philosophy. He is right that there is no opposition in the Dáil. There is very little difference between any of them.

First up, can we please not play the usual Fianna Fáil trick on this one? This is the most malignant and harmful piece of spin that Zanu-FF have managed to place in the public consciousness - this notion that no matter what they do, "shur the other crowd are just as bad". Joe Higgins, a man who I disagree with utterly but respect immensely, should know better than to be buying into this stuff. Seanie, I know you genuinely believe this and I don't think you were trying to intentionally play the party line here, but part of the reason Ireland is so bollixed right now is because of this belief. They say that in democracy you get the government you deserve. As an electorate, we have fallen for the "man of the people" guff that Ahern sold us, many people bought into the idea that FG are useless, despite the fact that nobody has a clue whether they are any good or not. They're like the hard working lad in the club that was no good under age and doesn't have the right surname. He keeps a low profile at training, and mutterings about him not being worth a shot keep him off the team. FG may be good, they may be atrocious. We simply don't know. Any more than we know whether they would have turned a blind eye to the banks leading us all into Armageddon, just like FF have.

The best thing that could happen Ireland would be for us to elect an inept opposition. For what it's worth, I believe FF to be the most competent government we have. However just like Brian Goggin might actually be the best man to run BOI, if he's never called to account for anything, he'll do a bad job.

So it is in government - we knew, deep down, going into the last election that the potential Taoiseach was [Edited by Mod 3 ] ALLEGEDLY up to his neck in sleaze, bribery and ill gotten gains. Even his supporters tended to brush off some of the proven dodgy monies like in Manchester, by saying that "shur twas only a few pound, it wasn't like he was taking millions." That's okay then. I'll break into your house tomorrow, but because I'll only take the TV and the petty cash and leave the jewellery and the car keys behind, I'm sure you'd say that I was a grand lad and meant no harm.

We knew, as a nation, and we honest to God went and did it anyway. Now I don't know what message you think that sent to the darkened halls of FF where the party strategists plot the course of the nation, but it sure as feck wasn't a demand for accountability. It was a case of keep the gravy train going by any means necessary.

So here we are then.

At various times, what this country needed, even allowing for the global factors, was to accept that the party was over, to take our medicine and get on with playing our part in the world economy. Of course, just like the Irish always do, the only thing that tells us that the party is over is when the guards call over or when the money runs out. An empty pocket won't get another round in, but by God the prospect of a massive hangover won't stop us having ten more for the road. We only stop when we're forced. We needed to cool the housing crisis. We needed to understand that having the highest cost of living in the world was not a good idea. We needed to get rid of the idea that no matter where you own land, some stroke of a councillor will always get it rezoned for you.

(In a country with as low a population as ours, in 2007 the average price for agricultural land was THREE TIMES that of the next highest country - in the world. Not in Europe - in the world. Holland had to salvage their land out of the sea, and yet they still valued it less - why? Because even if you owned thirty acres in the absolute back of beyonds, you would not sell it for fair agricultural price because God forbid the next guy got the zoning windfall. They say the disconnect between Irish house rents and prices is crazy - have a look at the rental yield on land and tell me we had a normal situation!!)

Likewise with the banks, the lads needed to hold their hands up, say that they made some bad loans, write them down, squeeze the developer into taking some action and learn from the mistakes. But of course that would be the honest, unpleasant way. Much more fun to roll up the interest, mark it as a performing loan, pay yourself whoppong great bonuses and dividends out of this fictional money, and then have Willie O'Dea go into the Dáil to say that the banks have €520bn in assets. Indeed they do Willie. Funny how the banks tell you that they have €520bn assets and €400bn liabilities, giving a nett value of €120bn - and yet if you take the market capitalisations according to the quoted share price (which is haemorraghing by the minute), these companies are considered by the market to be worth less than €10bn. I wonder why this could be? Surely Willie wouldn't lie to me?

As regards the bailout plan, the funny thing is that it could just be a ballsy move that might just work out. Obviously the moral hazard makes me sick to my stomach, but if it's a choice between moral hazard and letting the bad guys win or else doing the righteous thing and in doing so do untold damage to the lives and livelihoods of thousands of innocent Irish citizens, well then I'm old enough and pragmatic enough to live with the stain on conscience that supporting the bailout would leave. I've no doubt Richard Bruton felt all dirty inside when he supported the FF plan, but he probably felt it was the right thing.

The funny thing is that if it were ever called upon, I presume all we'd end up doing is laughing at the banks concerned and saying that ye must be having a laugh. It's the equivalent of me insuring the Mona Lisa against damage. I'll happily cash the premium and say I'm good for it, but if a modern day Martin Cahill broke into the Louvre one night and left with the infamous smile under his oxter, I don't think that Louvre would be too happy with the dust that would fall out of my pocket. It's the most nonsense guarantee in the world. We can barely afford the price of the few dirty unclean hospital beds that we have - we're being told to prepare for the worst budget since the war because we're €5-7bn short, and yet we'd have no bother mustering up hundreds of billions if we need to? Aye.

Not to mention the fact that I'd say if it went to the supreme court, chances are Brian Lenihan is acting way outside his constitutional remit, gambling the very solvency of the nation. I'd say if this bill goes through, a smart arse barrister with time on his hands could make a great case for treason against himself and Cowen if they tried actually.

But that's neither here nor there - it could work, and the option to put some real and meaningful restraints on the banks are there. Of course this is where I get upset, because he're's what should be happening, and none of it is.

(1) Banks should be told that there are no staff bonuses at any level and no dividends to be paid for as long as this guarantee is in place.
(2) The premium should be fair and economic - at least of the order of 1%, or 4bn per annum. If they don't like it, then go their own way. And none of this crap about how it'll be paid "if the guarantee is called on" - what the feck is that? I'd love to insure my car on those terms. I'll just tell Royal and Sun Alliance that I'll send in a premium the minute that I have an accident. No bother at all.
(3) Recapitalisation is vital. More deposits are all very well, but the issue is potential insolvency. Banks are supposed to be lending no more than 12 times their tier one capital. Ours are now up to around 40. All external subsidiaries and holdings to be sold off, and a compulsory rights issue of shares, followed by going the market and issuing enough shares to get back to 12:1.
(4) Fire both the Financial regulator and the head of the Central Bank. Hearing Patrick Neary on prime time last week was harrowing, and he's still in denial. Get him the feck out, and replace them with the most hard ass, contrary, stickler for detail we can find in the country. If banking licences have to be threatened, then do so.
(5) All auditors who went through the books and were satisfied to sign off on performing loans, to be told that they had an option of taking another look. If this was in fact their final answer, that the state thanks them for their time but reminds them that they will do their best to fully punish any auditor who's work is subsequently proven to be sub par, as well as suing them and their company for negligence and related damages - potentially quite high in this case.
(6) The state to sit on the board of all banks covered by the guarantee. (And not to just send a yes man - this person should be able to devote real and meaningful time to this task, not just another job for the boys where somebody gets €100k for attending four meetings a year and nodding.
(7) Above all, a few public hangings of those who are showing nothing but blatant disrespect to the system, to the nation and to all who sail in her. The likes of the two lads who bought the Anglo shares the day that they bailout was agreed - I know they're going to end up taking a bath on them, but that's not the point. A fricking 18 year old would know that it was inappropriate, and that disclosure meant that they were absolutely guaranteed to be found out - they didn't care, they just did it anyway. If they are that brazen when they know they'll be found out, imagine what they'd do when they might get away with it? Imagine the corruption that goes on in the background?

That's the final thing - it's funny how even when the world's markets fall, we tend to add on an extra 5% collapse, just for good measure. Again, reflecting the psychology of the state, our stock exchange is full of wheelers and dealers, lads who nod and wink and who live off the insider dealing. It is globally recognised as an absolute third world set up, comparable with the worst out there for shameless illegal practices, be they inseider dealing, ramping, collusion, you name it. Foreign investors realised this ages ago and have been bailing out en masse. The longer that we go without making a few very public executions, the longer it will take for the world to trust us again. Yet again, we must take our medicine, but we continue to hide in the closet and pretend that it'll all be okay.

I'm just pissed off that I went about buying gold last week and I still haven't got it nailed down. It cost me €40 an ounce today alone and I need to get this doon immediately. (As an aside, gotta love what happened today - liquidity is a global problem, nobody is lending, so what do we do - CUT interest rates. Basically, demand is high, supply is at an all time low, so we'll reduce the price - like that'll fix it. But God forbid the all knowing all seeing markets don't get what they want.) Thsi ship is going down folks. I strongly suggest getting a bit of yellow metal into your hand, because the world has seen nothing like what's coming. The only way to fix this is by getting back to positive, REAL interest rates of the order of 2%. Basically, if inflation is 4%, the ECB rate should be 6%. Until that happens, we are on a highway to destruction. Of course in order to make that happen, people would have to take a lot of unpleasant stuff down their throats.

That's not going to happen, so go buy gold. Do it now. I'm not feckin kidding.

[Zapatista]

Fair balls to ye Lane Shark. I'm f**king sick of the poxy ba*t*rds up to their eye balls in shit. The problem isn't that we just ignore them the problem is that we all want a piece of the pie.

It's too late to try a FG Government, what this country needs is a good hard ass dictatorship. 10 years of taking no shit and oweing no favours to anyone. The oposition and the Government are both cut from the same political cloth (if not the same moral cloth). It would take a FG Government 100 years to put an end to the bad practice and corruption ingrained into all the Irish systems. If there was a FG Government with a strong FF oposition the delayling and cost in accountability (as seen with the tribunals were there is no accountability) could be endless. A decent dictator would lock them up were they belong. 10 years and then an overthrow by the people were we can actually feel like we are in control of those controlling the country. Anything less will result in a return to today. The poster earlier in the thread who talked about getting armed and heading down Leinster St could be our only hope.

[Declan]

Excellent post LS

[Zapatista]

Excellent post LS

Just looking back and seen it was you Declan. Ye still on for it? I'd say you'd make a great dictator

[orangeman]

Loan Shark - makes a whole lot of sense  but buying gold now at inflated prices

[Gaaboardmod3]

Lone Shark,

I edited a couple of comments in there. There has been no proof of criminal behaviour by Ahern, so it's all allegations at this stage until something definitive comes out. There is certainly no proof for the statement you made at the start of your 4th paragraph. And we all no Bertie is a good GAA man, so he might read it and sue our arses.

[AZOffaly]

They're like the hard working lad in the club that was no good under age and doesn't have the right surname. He keeps a low profile at training, and mutterings about him not being worth a shot keep him off the team.

Hmmmm

[Declan]

I'd say you'd make a great dictator

A compassionate one Zapatista!!!!

[PadraicHenryPearse]

having worked in a bank branch, i find this harsh on your average branch or dept. bank Official, i don't see how they are responsibile for this.

) Banks should be told that there are no staff bonuses at any level and no dividends to be paid for as long as this guarantee is in place

otherwise excellent post.

PHP

[the Deel Rover]

having worked in a bank branch, i find this harsh on your average branch or dept. bank Official, i don't see how they are responsibile for this.

) Banks should be told that there are no staff bonuses at any level and no dividends to be paid for as long as this guarantee is in place

otherwise excellent post.

PHP

Yes your correct there php the ordinary bank official get paid fcuk all in some case slighly over the mininum wage  and a lot of them were on rolling cotracts in later years, yet they were put under immense pressure from management to reach targets be it selling life insurance , mortgage protection , credit cards maangement didn't care about the customer all they cared about was reaching thier targets and collecting their big fat bonus at the end of the year.

[Croí na hÉireann]

That's not going to happen, so go buy gold. Do it now. I'm not feckin kidding.

Been thinking about this myself, any tips/links on where to start??? Excellent article by the way...

[PadraicHenryPearse]

that was me deel rover. i am only 26 but i remember when it was all about the customer even if service was still slow u did your best for the customer, now its about cross selling as many products and making as much as you can from customer (that word isn't really used anymore either internally). glad i have a yr off might extend to 2 years and stay in Oz.

on the gold front, OVOCA GOLD are up 200% this morning. were 0.02 at start 0.06 now. will it go further or come back???

[Down Gael]

Excellent post Loan Shark, pity we couldnt get someone like you to run the country.