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

[bcarrier]

I am confused by thid external debt measure ...Main Street ....does external debt matter ...are there external assets to offset this ..and is this CNBC figure  distorted by exposure to NI/GB ( a different currency) property loans ?

[muppet]

http://www.youtube.com/watch?v=GPVe9scW_7Q&feature=related

Even Dustin has emigrated.

[Main Street]

I am confused by thid external debt measure ...Main Street ....does external debt matter ...are there external assets to offset this ..and is this CNBC figure  distorted by exposure to NI/GB ( a different currency) property loans ?

.does external debt matter?
Yes it matters. It has to be paid back. and you personally have guaranteed that it will be paid back.

You just have to understand that when the property prices went through the roof there was not enough money deposited in the Banks to cover the big loans people had to take to buy a home.  Banks borrowed from abroad. Prudence was slaughtered.

are there external assets to offset this?
You may be confused into thinking that external debt has to be connected to external assets.
That is not necessarily so.
External debt is the money borrowed by any entity inside the State - Gov borrowing - Banks - investment companies - Business- private,  that has to be paid back to financial institutions outside the State.
There can be assets outside the State, property in different countries, but in the main, the supply of money from foreign banks into Ireland went on property inside the State.  Each bank has its commercial and private property portfolio. These are called assets. Your mortgage is an asset of the bank. The loan given to buy Jurys Hotel is a (dwindling) asset of the Bank.  

Don't worry though, your generosity knows no bounds, your heart has been melted by the plight of the speculator & the Banks,  and you have promised to pay off the foreign bank in full, for the difference between the real value and the inflated value.

[Lecale2]

A very interesting article on financial war.

http://www.scoop.co.nz/stories/HL0904/S00068.htm

[bcarrier]

Excellent article Lecale. Some good history in there ...its pretty convincing stuff. Even the CNBC slide show could be considered part of US propoganda.

Main street ..thanks . Reading Lecale's article it seems that governments should never borrow in foreign currency because they then lose their ability to inflate themselves out of debt...I am not sure how applicable to ireland this is given how little of eurozone we represent .

Presumably the current Irish government exposure to external debt comes through and party because of the bank guarantee  ?
Maybe the penny hasnt dropped but I cant see how external debt is THAT important ...is it not just really an exchange risk on top of the lending risk ...it could even be a positive depending on timing of strike ..( Euro strength against sterling ?) .

[Main Street]

You mean which is the lesser of 2 evils , printing money or bowrrowing from abroad.
Depends on the circumstances  trade balance and the current level of debt.
Understand that the Government has not served the interests of the State and is continuing not to serve the interests of the State.

The way (and some say the only way) a country can become stable is to have a balanced trade  (exports and imports) and have their money supply backed by precious metals.
In every year of the past 10 years the State should have been putting by some 5% of resources to buy precious metals.

Money supply is a complicated one.
I don't know how The Irish CB relates to the Euro CB.

In the UK if someone wanted a 100% mortgage from a UK bank to buy a property valued at £1m,
a property that once was valued at £100K some 5 years previous.
The Bank went to the UK CB and deposited some guarantee to get the £900k difference printed out.
The UK CB changed its rules to allow that to happen.
Money supply was simply increased to cover the new value of the property.
That money stays in circulation when that mortgage is defaulted upon and property value goes down.
(Until the taxpayer scoops it up the waste).

Banks are not taking risks, they chose to invest Gov bailout money in low interest securities not to the public.
The UK CB has responded to the current crisis by printing money. It's called Quantitive Easing.
Money is printed (virtually) by the UK CB and it is used to buy up all sorts of toxic assets on the Banks books.
Theoretically this is to force the banks to lend to business /private and start to take risks again.

Despite the injection of 10s of billions of new currency into the market, the GBP has risen in value, go figure.

What one expects to happen is that the GBP falls further in value thus making exports cheaper.
But the UK  has lost its manufacturing base and imports more than it exports.
In that case, one would expect the GBP to crash in value as people rush to get rid of their stocks of GBP.

[Declan]

http://www.yourtechstuff.com/techwire/2009/04/im-not-answerable-to-you.html

The attitude of these boys just keeps getting better

[orangeman]

Does this mean that interest rates are set to rise




Stronger demand in latest bond auction
Tuesday, 19 May 2009 11:30
The National Treasury Management Agency has sold €1 billion worth of Government bonds in an auction this morning.

This was the first auction since Finance Minister Brian Lenihan began a tour of European financial centres to put the case for investing in Irish bonds. Demand was much stronger than in the previous auction last month.

The NTMA is trying to raise €25 billion this year to fund the widening Budget deficit. Before this morning's auction, it had already raised €12.3 billion.

A 4% bond which matures in 2014 raised €300m, while a 4.4% 2019 bond raised €700m. The yield on the 2014 bond was lower than in the April auction, but the yield on the 2019 bond was higher.

Yields on Irish bonds had been moving well ahead of benchmark German bonds but have eased in recent weeks.

[Bogball XV]

Does this mean that interest rates are set to rise

virtually zero correlation between irish bond yields and ECB interest rates (we should remember that the ECB are the only actual buyers of Irish bonds, both directly and indirectly through irish banks) so it is they who receive the interest payments we're making.

[FermGael]

Anybody see todays Irish news.

Bogus boom busted http://www.irishnews.com/irishnews/540/5860/2009/5/28/618666_382747618557Bogusboom.html
WHEN is a property queue at an estate agent's not a queue?

When a model is paid to pose in a sleeping bag and potential buyers are asked to turn up at a specific time.

Last week this picture was sent out to newspapers billed as a rare good-news property story, showing people queueing for the new Sugar Walk apartments in Belfast city centre.

However, the PR company and developer have now admitted that the queue was at least partially staged.

[whiskeysteve]

Anybody see todays Irish news.

Bogus boom busted http://www.irishnews.com/irishnews/540/5860/2009/5/28/618666_382747618557Bogusboom.html
WHEN is a property queue at an estate agent's not a queue?

When a model is paid to pose in a sleeping bag and potential buyers are asked to turn up at a specific time.

Last week this picture was sent out to newspapers billed as a rare good-news property story, showing people queueing for the new Sugar Walk apartments in Belfast city centre.

However, the PR company and developer have now admitted that the queue was at least partially staged.

seen that, the model posing as someone waiting overnight is hilarious. Gotta beat that rush for a £135,000 apartment!!

[supersarsfields]

Ferm could you not take that Job application down from the bottom of your posts now?  Has that role not been filled!!

[Declan]

Well folks just opened the payslip for May there- Between myself and the good lady we're down about € >:(300

[orangeman]

Well folks just opened the payslip for May there- Between myself and the good lady we're down about € >:(300

Lucky enough - you're still both working.

[Donagh]

Things just got a lot worse. Anglo is down over 4 billion in six months which means the Irish tax payer is down six billion and that could double by the end of the year. Developers were allowed to take out multiple loans secured on a single property.

Ireland to bail out Anglo after record loss

* Reuters, Friday May 29 2009

By Carmel Crimmins and Padraic Halpin
DUBLIN, May 29 (Reuters) - Ireland's government is injecting up to 4 billion euros ($5.6 billion) into Anglo Irish Bank in a U-turn forced by a fresh wave of bad loans that pushed the nationalised lender to the worst loss in the country's banking history.
Finance Minister Brian Lenihan, who earlier this week said Dublin was in no rush to inject capital into the bank, described the 4.1 billion euro first-half pretax loss it reported on Friday as "extremely disappointing".
The bailout for a commercial lender that has become a poster boy for the decline of the 'Celtic Tiger' economy prompted a spike in Irish borrowing costs.
The spread on the country's sovereign 10-year debt widened by 7 basis points over the German bund as investors fretted over the spiralling cost of dealing with twin fiscal and banking crises.
"There's been a widespread belief that resolving the banking crisis is going to be expensive and most people expected that government borrowing would increase substantially over the next few years," said Dermot O'Leary, chief economist with Goodbody Stockbrokers,
"(But) the scale of it may come as somewhat of a surprise and the speed being required."
In addition to the bailout, which will be funnelled through over the coming weeks, the Irish regulator has temporarily exempted Anglo from some capital requirements.
Its core tier 1 ratio sank to just 1.4 percent at the end of March but Anglo said it would rise to 6.4 percent following the funding injection.
The bank will buy back some outstanding subordinated debt to generate additional capital, matching a similar move by larger rival Bank of Ireland to take advantage of deeply discounted secondary prices.
Shares in Bank of Ireland and Allied Irish Banks initially dipped on Anglo's misfortunes but later recovered, with Allied up nearly 8 percent and Bank of Ireland 3 percent stronger.
Analysts said investors had taken some comfort from the regulator's lifting of some of Anglo's capital requirements.
SPECTACULAR FALL
A darling of investors during the economic boom, Anglo Irish's spectacular fall from grace highlighted how crony capitalism, property speculation and reckless lending had partly fuelled Ireland's heady growth and accelerated its decline.
Dublin was forced to take over the country's No. 3 bank in January after customer and shareholder confidence collapsed in the face of a string of scandals.
The fallout from the scandals damaged Ireland's reputation overseas, hiked its borrowing costs and prompted an overhaul of the country's system of financial regulation.
Anglo, whose fortunes are tied to a number of struggling property developers, took an impairment charge of 4.1 billion euros for the six months to end March and predicted loan losses for the three-year period to the end of September 2011 would spiral to 7.5 billion euros.
Anglo, which will be transferring its land and development book to the government's "bad bank" scheme for parking toxic assets, also warned that a further 10 percent fall in land and development assets could lead to an additional impairment charge of 1.5 billion euros.
The three-year outlook takes into account an estimated land and development writedown prior to its transfer to the bad bank, but additional impairments of 1.5-3.5 billions were possible under a range of further stress scenarios following the bad bank's creation, it said.
Anglo's bad debt outlook overshadows even the gloomy view of larger rivals.
Bank of Ireland, the country's No 1 lender by assets, expects its bad debt charge to total 6 billion euros for the three years to March 2011. No 2 Allied Irish Banks has said it will likely double its bad debt charge this year to 4.3 billion euros.
(Editing by Rupert Winchester, John Stonestreet)