Just copied the thread title from politics.ie: http://www.politics.ie/economy/137541-has-run-ireland-begun.html (http://www.politics.ie/economy/137541-has-run-ireland-begun.html)
This topic has had 19,000 views in last 4 hours ..
Cost of Irish Borrowing - 10 year bonds has spiked this morning above 6%
http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND#chart (http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND#chart)
http://blogs.wsj.com/marketbeat/2010/09/07/europes-bond-market-tanks-again/ (http://blogs.wsj.com/marketbeat/2010/09/07/europes-bond-market-tanks-again/)
http://sg.finance.yahoo.com/news/Bonds-Spreads-In-Greece-And-siliconalley-822667600.html?x=0 (http://sg.finance.yahoo.com/news/Bonds-Spreads-In-Greece-And-siliconalley-822667600.html?x=0)
Keep all your money under your bed for the time being !!
We are FUBARed
How is this news boys? How are we worse off today than we were yesterday?
19,000 views on a message board isn't really the same as seeing the Reaper at the end of the bed. The country is in shit-street alright, and will be for years, but I don't see why this story in particular is such a big deal. I don't have a background in international finance - maybe someone can explain it to me?
Quote from: mick999 on September 07, 2010, 02:50:35 PM
Keep all your money under your bed for the time being !!
If i had any to put under it id seriously consider it :-[
Quote from: IolarCoisCuain on September 07, 2010, 03:13:51 PM
How is this news boys? How are we worse off today than we were yesterday?
There won't be a penny of cash left in the Country soon. We'll be buying bread with turf.
Quote from: IolarCoisCuain on September 07, 2010, 03:13:51 PM
How is this news boys? How are we worse off today than we were yesterday?
19,000 views on a message board isn't really the same as seeing the Reaper at the end of the bed. The country is in shit-street alright, and will be for years, but I don't see why this story in particular is such a big deal. I don't have a background in international finance - maybe someone can explain it to me?
Far from me to claim to understand international finance .... but see below an explanation from someone else
What has happened? I have no idea about economics. Can someone explain this to a simpleton in layman's terms?
The 10 year bond yield has been increasing today and is now above 6. It would have gone higher but for the intervention of the ECB.
Why does this matter? Because we're now paying more interest for the money we have to borrow to run the country. Why is this important? Hammer puts it well below ...
Quote:
Originally Posted by hammer
It will not be long before total income tax take is wiped out by debt interest.
And this is after the extra income levies, health levies,etc introduced ...................
So we will need to run all services on CT (12.5%), VAT, CGT, CAT and excise.
The country is effectively bankrupt, and the bond markets and ECB know it. I guess we knew that we were bankrupt already, but the higher that the bond yield rate goes, the more interest we (the country) pay on our borrowings and the worse we get ...
Quote from: Zapatista on September 07, 2010, 03:43:31 PM
Quote from: IolarCoisCuain on September 07, 2010, 03:13:51 PM
How is this news boys? How are we worse off today than we were yesterday?
There won't be a penny of cash left in the Country soon. We'll be buying bread with turf.
Maybe that's Cowan's plan? Return the power base to the Midlands, and their brown gold.
Quote from: mick999 on September 07, 2010, 03:45:52 PM
Quote from: IolarCoisCuain on September 07, 2010, 03:13:51 PM
How is this news boys? How are we worse off today than we were yesterday?
19,000 views on a message board isn't really the same as seeing the Reaper at the end of the bed. The country is in shit-street alright, and will be for years, but I don't see why this story in particular is such a big deal. I don't have a background in international finance - maybe someone can explain it to me?
Far from me to claim to understand international finance .... but see below an explanation from someone else
What has happened? I have no idea about economics. Can someone explain this to a simpleton in layman's terms?
The 10 year bond yield has been increasing today and is now above 6. It would have gone higher but for the intervention of the ECB.
Why does this matter? Because we're now paying more interest for the money we have to borrow to run the country. Why is this important? Hammer puts it well below ...
Quote:
Originally Posted by hammer
It will not be long before total income tax take is wiped out by debt interest.
And this is after the extra income levies, health levies,etc introduced ...................
So we will need to run all services on CT (12.5%), VAT, CGT, CAT and excise.
The country is effectively bankrupt, and the bond markets and ECB know it.
I guess we knew that we were bankrupt already, but the higher that the bond yield rate goes, the more interest we (the country) pay on our borrowings and the worse we get ...
Thanks for that Mick. Just a few questions.
1. What's a ten year bond?
2. What's a bond yield?
3. Why is ten year bond yield being above six significant? Six what?
4. Why is ECB (European Central Bank - I do know that one) intervention insignificant?
5. How long will it be before total income tax take is wiped out by debt interest? Weeks, months, or years? Will Enda have time to get elected and steady the ship of state, or is it happening on Friday?
6. Why won't the ECB intervene again? Significantly, this time?
7. What does the country being bankrupt mean, in real terms? Does it mean the arrival of the IMF is inevitable?
They were talking about what the IMF on the radio last week (Raidió na Gaeltachta). Apparently they have the same process for every country that can't balance its books, which is the same as you'd do in your own household if your expenditure exceeds your income. It's simple enough. Nasty, of course, but very simple.
It's all the jargon that I don't get. The arrival of the IMF means that the Government has failed to mind the shop, and someone else has to do it for us. That's the next step.
What I want to know is how nearer are we as a result of this "run on Ireland" today to the IMF coming here. Again, in layman's terms please. I think we'd all like to know. When the IMF gets here we'll know all about it. I can assure you of that. I just want to know are they now on their way because of this so-called "run on Ireland." I like to know where I stand, if I can.
this sounds eerily like a pile of threads 2 years ago, am i suffering from deja-vu? Surely there's something up, did not our masterful department of finance, finance minister (who quickly got a handle on his brief because of his training as a senior counsel) and bank chief execs sort all this in Sept 2008? Surely you must remember, the bank guarantee scheme - the cheapest bailout in europe as we were constantly reminded :D :D :D :D :D :D :D
Maybe the Anglo problem can be taken over by the ECB.
Maybe the game is up for Fianna Fail.
Quote from: Bogball XV on September 07, 2010, 04:05:23 PM
this sounds eerily like a pile of threads 2 years ago, am i suffering from deja-vu? Surely there's something up, did not our masterful department of finance, finance minister (who quickly got a handle on his brief because of his training as a senior counsel) and bank chief execs sort all this in Sept 2008? Surely you must remember, the bank guarantee scheme - the cheapest bailout in europe as we were constantly reminded :D :D :D :D :D :D :D
Again, I'm exposing my lack of financial acumen here. Do you think we'd be better off if they hadn't guaranteed the banks? Or do you think the bank guarantee failed? What is the basis for these judgments? I don't know anything about banking. I don't know if this is good or bad.
I notice a certain amount of inconsistency in the reporting of this story today. Here's RTÉ: http://www.rte.ie/news/2010/0907/economy_bonds.html
It says the yield on ten-year Irish Bonds is twice that of Germany's. But why compare Ireland with Germany? Why not compare us with Portugal, Italy, Greece and Spain? Are they not the countries against whom we should be comparing ourselves, rather than Germany?
Again, I don't know. I don't understand any of this. If anyone can help, I'd be glad to learn.
I've many's the post over the last 2 years explaining my take on the guarantee - go check them out on the big bailout thread - it'll be a long read, but you'll be well educated financially come the end of it.
Quote from: Bogball XV on September 07, 2010, 04:32:02 PM
I've many's the post over the last 2 years explaining my take on the guarantee - go check them out on the big bailout thread - it'll be a long read, but you'll be well educated financially come the end of it.
::) ::) ::) ::)
Yes it does read that bad.
I see we've just extended the bank guarantee until the end of the year ....
http://www.politics.ie/economy/137568-bank-guarantee-extended-dec-31st.html (http://www.politics.ie/economy/137568-bank-guarantee-extended-dec-31st.html)
Bank Guarantee extended to Dec 31st
--------------------------------------------------------------------------------
Brian Lenihan has just announced that the Government guarantee for short term liabilities will be extended to December 31st 2010. The guarantee includes corporate and interbank deposits, as well as debt securities. The expiry date for the guarantee was previously Sept 29th (this month).
Statement from the Department of Finance follows.........
Quote:
Minister announces extension of the short term guarantee
The Minister for Finance, Mr Brian Lenihan, TD today announced that the Government guarantee for short term bank liabilities, including corporate and interbank deposits as well as debt securities would be extended from its current expiry date of 29 September to 31 December 2010.
A State guarantee will therefore be available for both short- and long-term liabilities up to the end of the year. This is an important support to the Irish banking system facilitating their access to both short- and longer-term funding to help maintain the overall stability of the banking sector and complements the broad Government Strategy to restore fully the banking system and maximise its contribution to overall economic recovery.
This modification to the Guarantee was recommended to the Minister by both the Governor of the Central Bank, the Financial Regulator and the NTMA. As is customary the Department will be liaising with the European Central Bank on this measure. An approval by the European Commission under the State aid rules needs to be secured before the guarantee can be extended.
Following the Minister's meeting with Commissioner Almunia yesterday he is satisfied that Commissioner Almunia is aware of the Irish situation. It is intended that some technical details relating to the implementation of this modification will be agreed with the European Commission in coming days.
The Minister said that:
"I am very grateful for the assistance of Commissioner Almunia and his officials in the European Commission for their open engagement and co-operation on this important issue for Ireland and I look forward to continued strong co-operation in resolving this and other significant issues for the Irish banking system in the coming weeks"
The Minister reiterated that this announcement does not affect retail deposits of up to €100,000 as these deposits continue to be guaranteed under the ordinary Deposit Guarantee Scheme and that Scheme is not time limited.
Quote from: Bogball XV on September 07, 2010, 04:32:02 PM
I've many's the post over the last 2 years explaining my take on the guarantee - go check them out on the big bailout thread - it'll be a long read, but you'll be well educated financially come the end of it.
Cheers Bogball XV. Can you shoot me a link?
Quote from: AZOffaly on September 07, 2010, 03:48:41 PM
Maybe that's Cowan's plan? Return the power base to the Midlands, and their brown gold.
Jaysis! I'm only after seeing the conection. They seen it coming and that's why the ordered the protection of the best bogs of the country. Ireland's soon to be currency stored in the best bogs of the midlands and the west are now in FF control. They're good.
Quote from: Zapatista on September 07, 2010, 04:55:23 PM
Quote from: AZOffaly on September 07, 2010, 03:48:41 PM
Maybe that's Cowan's plan? Return the power base to the Midlands, and their brown gold.
Jaysis! I'm only after seeing the conection. They seen it coming and that's why the ordered the protection of the best bogs of the country. Ireland's soon to be currency stored in the best bogs of the midlands and the west are now in FF control. They're good.
Bord na Móna have such value on their assets that they've gone and built a massive municipal waste landfill near Edenderry. ::)
Aye but they are cancelling that out by trying to build a big lake (with water pumped over from the Shannon) near Portarlington :D
QuoteIt is intended that some technical details relating to the implementation of this modification will be agreed with the European Commission in coming days.
I'll bet that when we hear what they are we will wonder how they could be discribed as
technical.
The Minister said that:
Quote
"I am very grateful for the assistance of Commissioner Almunia and his officials in the European Commission for their open engagement and co-operation on this important issue for Ireland and I look forward to continued strong co-operation in resolving this and other significant issues for the Irish banking system in the coming weeks"
More begging to come.
QuoteCheers Bogball XV. Can you shoot me a link?
Try this
http://gaaboard.com/board/index.php?topic=9548.msg385107#msg385107 (http://gaaboard.com/board/index.php?topic=9548.msg385107#msg385107)
We will soon hear the announcement of a European bail-out similar to Greece, with IMF input . You think times are hard now, but you aint seen nothing yet. In honesty it has to be said that given the arrogance and profiglacy of the Celtic Tiger years, no people deserve the hardship more, as you have sown so shall you reap
Quoteno people deserve the hardship more, as you have sown so shall you reap
That's the sort of shite that annoys me - I know plenty of people who didn't participate in the so called "boom" who are now paying for the sins of others
Quote from: Pangurban on September 07, 2010, 08:46:03 PM
We will soon hear the announcement of a European bail-out similar to Greece, with IMF input . You think times are hard now, but you aint seen nothing yet. In honesty it has to be said that given the arrogance and profiglacy of the Celtic Tiger years, no people deserve the hardship more, as you have sown so shall you reap
You can't blame the people who did their jobs and relied on others to do theirs. Blame those who not only failed to do their job but also were involved in criminality. We now know who they are.
Quote from: Declan on September 07, 2010, 09:35:11 PM
That's the sort of shite that annoys me - I know plenty of people who didn't participate in the so called "boom" who are now paying for the sins of others
And more being born daily.
Watching O'Cuiv on Primetime now - God help us. He's blaming scare tactics now and the govt are confident that their figures re NAMA and the banks are right.
Anglo will be "sorted" in the next few weeks. We're working on a consistent path etc - It's scary how screwed we are
Quote from: Declan on September 07, 2010, 06:22:11 PM
QuoteCheers Bogball XV. Can you shoot me a link?
Try this
http://gaaboard.com/board/index.php?topic=9548.msg385107#msg385107 (http://gaaboard.com/board/index.php?topic=9548.msg385107#msg385107)
Thanks Declan. There are are 102 pages on that discussion so, while I'm wading through it, I wonder if someone can answer these two questions:
1. Was this run on the banks just a normal day, actually, or did something more serious happen? This is important because non-financial people like me need to know if we can trust what's reported in the media.
2. Again, a media question: why is the Irish ten-year bond yield being compared to Germany and not Portugal, Italy, Greece or Spain?
Quote from: Pangurban on September 07, 2010, 08:46:03 PM
We will soon hear the announcement of a European bail-out similar to Greece, with IMF input . You think times are hard now, but you aint seen nothing yet. In honesty it has to be said that given the arrogance and profiglacy of the Celtic Tiger years, no people deserve the hardship more, as you have sown so shall you reap
A part of me hopes Pangurban is correct - although there's no need for the holier-than-thou sow as you reap stuff. The IMF are harsh - you're looking at half the numbers of hospitals and schools in the state, for starters - but the sooner you take your medicine, the sooner you get better. You have to take steps to turn things around and if the domestic political apparatus is incapable of doing it then it has to be outsourced, obviously.
In the meantime, I'd be interested in some answers to my two short questions while I work my way through the 102 pages in that previous thread.
Quote from: thebigfella on September 07, 2010, 04:35:27 PM
Quote from: Bogball XV on September 07, 2010, 04:32:02 PM
I've many's the post over the last 2 years explaining my take on the guarantee - go check them out on the big bailout thread - it'll be a long read, but you'll be well educated financially come the end of it.
::) ::) ::) ::)
Yes it does read that bad.
Just had a look at it there on the link kindly supplied by Declan (thanks), and I think if some of the decision makers had read that intead of listening to the unqualified dept. of finance personnel it might have done them some good (not necessarily my own drivel, but the sensible posts of others).
Quote from: IolarCoisCuain on September 07, 2010, 11:09:32 PM1. Was this run on the banks just a normal day, actually, or did something more serious happen? This is important because non-financial people like me need to know if we can trust what's reported in the media.
2. Again, a media question: why is the Irish ten-year bond yield being compared to Germany and not Portugal, Italy, Greece or Spain?
The irish borrowing rate is compared to the german rate, because back in periods of financial stability that is effectively the rate that the irish govt could borrow at too, as all eu govts were able to borrow at more or less the german rate. The german rate has not deviated significantly over the past 2/3 years, but as the irish rate has, that it obviously what we should compare it with. The premium over the german rate is what the market needs in order to balance the much greater risk of an irish govt default now.
As for the run on the banks today, i personally don't think it's that much different that many other days over the past two years and less worrying than many of them.
Quote from: Bogball XV on September 07, 2010, 11:19:28 PM
As for the run on the banks today, i personally don't think it's that much different that many other days over the past two years and less worrying than many of them.
Is the difference not the fact that the Guarantee was due to run out at the end of this month. Couple that with the continued job losses and increased borrowing are we not at a stage that we see the game is up? When the Guarantee does run out we could be expected to write a cheque we can't cash as we are to high risk for borrowing to cover the Guarantee? Bankrupt?
Thanks for the first Q. It cleared it up for me too.
Quote from: IolarCoisCuain on September 07, 2010, 11:09:32 PM
This is important because non-financial people like me need to know if we can trust what's reported in the media
That thread gives a good indication of who is trust worthy in the media or atleast who has got it right so far.
I can't help but think the lack of detail in the main media on today is all part of the
don't start a panic and run on the banks tactic.
It's great being a Northerner. All hail the Pound.
Yous feckers better have that shite sorted out by 2016 or we're staying put.
Quote from: ONeill on September 07, 2010, 11:38:52 PM
It's great being a Northerner. All hail the Pound.
Yous feckers better have that shite sorted out by 2016 or we're staying put.
"I
think this place needs a little bit of Belfast efficiency"
Quote from: Zapatista on September 07, 2010, 11:33:59 PM
Is the difference not the fact that the Guarantee was due to run out at the end of this month. Couple that with the continued job losses and increased borrowing are we not at a stage that we see the game is up? When the Guarantee does run out we could be expected to write a cheque we can't cash as we are to high risk for borrowing to cover the Guarantee? Bankrupt?
tbh i'm not sure, never checked out p.ie but they do tend to get a little hysterical over there about many things, slow political month and all.
I'd still be happy enough to see the guarantee go, i'm not sure there's any point to it anymore - i mean the markets know that we couldn't cover it, so what is it actually there for? We own virtually all the bank stock in the country too (don't get me started on NAMA next though), so why do we want to keep the guarantee going?
Aye, there's pain to come and plenty of it, unfortunately for each and every one of us and I certainly don't share pangurban's sentiments, because whilst we all benefited a little from the tiger, we're all going to suffer massively over the next decade(s).
Quote from: Bogball XV on September 07, 2010, 11:10:45 PM
Quote from: thebigfella on September 07, 2010, 04:35:27 PM
Quote from: Bogball XV on September 07, 2010, 04:32:02 PM
I've many's the post over the last 2 years explaining my take on the guarantee - go check them out on the big bailout thread - it'll be a long read, but you'll be well educated financially come the end of it.
::) ::) ::) ::)
Yes it does read that bad.
Just had a look at it there on the link kindly supplied by Declan (thanks), and I think if some of the decision makers had read that intead of listening to the unqualified dept. of finance personnel it might have done them some good (not necessarily my own drivel, but the sensible posts of others).
I'm five pages in now, and you're doing yourself a disservice Bogball. Seems to me that you've had your finger on the pulse from the start and you were able to explain the German comparison just now. Kinda wish you were in charge.
I think you were right on the Bailout thread about Lenihan being bounced by the banks but, you know, what else could he do? He was betting the farm. He couldn't afford to get it wrong. The banks might have played him a fast one but sometimes you can't afford to call a bluff. Just in case. You need to hang onto the farm whatever else happens.
Quote from: Zapatista on September 07, 2010, 11:37:10 PM
Quote from: IolarCoisCuain on September 07, 2010, 11:09:32 PM
This is important because non-financial people like me need to know if we can trust what's reported in the media
That thread gives a good indication of who is trust worthy in the media or atleast who has got it right so far.
I can't help but think the lack of detail in the main media on today is all part of the don't start a panic and run on the banks tactic.
I'm not sure you're right there Zapatista. The guarantee they've extended is for corporate loans. The guarantee on savings on deposits, the pleb money that the likes of me have in the bank, such as it is, has no sell-by date. We couldn't run the banks if we tried. That's not why the thing isn't being explained.
I personally think it's because a huge amount of commentators don't understand what's going on, won't ring the likes of Bogball to find out, and possibly don't care, because SHOCK! HORROR! is news, what's actually going on isn't always.
Quote from: IolarCoisCuain on September 08, 2010, 12:02:37 AM
I'm not sure you're right there Zapatista. The guarantee they've extended is for corporate loans. The guarantee on savings on deposits, the pleb money that the likes of me have in the bank, such as it is, has no sell-by date. We couldn't run the banks if we tried. That's not why the thing isn't being explained.
I think the thing is that we could run on the banks regardless of who is or isn't guaranteed. It's plebs like you and I that have the mortgages, car loans etc out in these banks and these banks are dealing with our Cash on a daily basis as we are actually paying them back. A run by sam and sue shopper would be a major drain on their basic turnover. Billions have already been pumped in and disappeared in the black hole. Business is Guaranteed upto 100 000 which is pittance especially when the majority of small to medium business don't have a bean in the bank and are begging for credit. The real money of the multi nationals and other high flyers has already been removed and much of it was never held here in the first place.
Besides the Guarantee will have to be paid out by the tax payers who are the very people who are Guaranteed. It's of no benefit to us plebs other than a confidence measure.
But confidence has a value too. The present increasing interest rates on bonds is a self fulfilling prophecy, as the extra interest payable is the thing that brings the house of cards down. There are two things at work here, uncertainty about the full extent of the needs of the banks and uncertainty about the world economy. If trade picks up then Ireland has a reasonable chance of paying its way, if interest rates are not too high.
Quote from: IolarCoisCuain on September 08, 2010, 12:02:37 AMI'm five pages in now, and you're doing yourself a disservice Bogball. Seems to me that you've had your finger on the pulse from the start and you were able to explain the German comparison just now. Kinda wish you were in charge.
I think you were right on the Bailout thread about Lenihan being bounced by the banks but, you know, what else could he do? He was betting the farm. He couldn't afford to get it wrong. The banks might have played him a fast one but sometimes you can't afford to call a bluff. Just in case. You need to hang onto the farm whatever else happens.
I'm blushing here, the wife thinks I'm on one of them online dating sites!!
Naw, tbh, I was probably copying and pasting from other sites with half of that stuff.
I appreciate that lenihan was in a difficult position, but imo he could have guaranteed all deposits of all types, he had no need to touch the the borrowings of banks, but the bank chief execs told him that was the way forward. Their thinking (because they honestly didn't appreciate just how fcuked they were) was that they'd still be able to secure funding from the money markets if they had a govt guarantee behind them. As it happened they couldn't because the markets figured out straight away that ireland couldn't really make good on its promise and almost the only source of funding for our banks since has been the ecb. The problem with that has been that we also promised to pay existing debt, in other words all of anglo and inbs existing debt, in the normal course of events, both those banks would have gone under and the people who lent them money would have lost out, that would have been mostly international financiers, that would have been unfortunate, but they were big boys and took a decision to lend money to people they shouldn't have, they should have checked the security on that lending (possibly 45 flats in carrick on Shannon aren't worth 2.3bn), they received a premium in the form of interest which they deemed acceptable. It wasn't and they should have paid the price.
The bank chiefs main concern was to retain control of their banks, they thought that with sources of short term funding secured they'd ride out the short storm and be back as good as new and lending to all and sundry within a year. They didn't appreciate that the property bubble was actually a bubble and that most of their assets (being loans secured on now worthless assets) were worthless. In common with most of the country, they'd lost the run of themselves and forgot about basic economics. They say too much champagne does that sometimes.
Quote from: Bogball XV on September 08, 2010, 12:28:01 AM
Quote from: IolarCoisCuain on September 08, 2010, 12:02:37 AMI'm five pages in now, and you're doing yourself a disservice Bogball. Seems to me that you've had your finger on the pulse from the start and you were able to explain the German comparison just now. Kinda wish you were in charge.
I think you were right on the Bailout thread about Lenihan being bounced by the banks but, you know, what else could he do? He was betting the farm. He couldn't afford to get it wrong. The banks might have played him a fast one but sometimes you can't afford to call a bluff. Just in case. You need to hang onto the farm whatever else happens.
I'm blushing here, the wife thinks I'm on one of them online dating sites!!
Naw, tbh, I was probably copying and pasting from other sites with half of that stuff.
I appreciate that lenihan was in a difficult position, but imo he could have guaranteed all deposits of all types, he had no need to touch the the borrowings of banks, but the bank chief execs told him that was the way forward. Their thinking (because they honestly didn't appreciate just how fcuked they were) was that they'd still be able to secure funding from the money markets if they had a govt guarantee behind them. As it happened they couldn't because the markets figured out straight away that ireland couldn't really make good on its promise and almost the only source of funding for our banks since has been the ecb. The problem with that has been that we also promised to pay existing debt, in other words all of anglo and inbs existing debt, in the normal course of events, both those banks would have gone under and the people who lent them money would have lost out, that would have been mostly international financiers, that would have been unfortunate, but they were big boys and took a decision to lend money to people they shouldn't have, they should have checked the security on that lending (possibly 45 flats in carrick on Shannon aren't worth 2.3bn), they received a premium in the form of interest which they deemed acceptable. It wasn't and they should have paid the price.
The bank chiefs main concern was to retain control of their banks, they thought that with sources of short term funding secured they'd ride out the short storm and be back as good as new and lending to all and sundry within a year. They didn't appreciate that the property bubble was actually a bubble and that most of their assets (being loans secured on now worthless assets) were worthless. In common with most of the country, they'd lost the run of themselves and forgot about basic economics. They say too much champagne does that sometimes.
You know something Bogball? I didn't know until tonight that he had guaranteed borrowings as well as savings, or that he could guarantee one without the other. I am fighting to keep my head above water with all this stuff, and I think I'm a reasonably educated guy.
There was a story on the news about 40% of adults in Ireland struggling with basic maths. That's enough votes for over fifty TDs. That's enough to dictate governance. How are they going to figure all this shit out?
Quote from: Bogball XV on September 08, 2010, 12:28:01 AM
I appreciate that lenihan was in a difficult position, but imo he could have guaranteed all deposits of all types, he had no need to touch the the borrowings of banks, but the bank chief execs told him that was the way forward. Their thinking (because they honestly didn't appreciate just how fcuked they were) was that they'd still be able to secure funding from the money markets if they had a govt guarantee behind them.
I doubt it. They knew too well how fucked they were the only difference now is that with state backing and Nationalisation it's threatens to take us all down with it.
The bank chiefs told him to Nationalise but Cowen refused saying "we're not f**king Nationalising Anglo".
Lenihans position was clear. Remember the Golden Circle? There was a large cross over of interested people even outside the Golden circle. The people running Anglo were/are the same people regulating it, the same people holding the shares, the same people who borrowed and the same people who's support FF required to be in Government (the trinity of Bankers Builders and FF). The decision was made to make a limited Guarantee but as a limited guarantee would only protect the deposits the same people I just mentioned were still wide open crash from all their other interests and borrowings in Anglo. Lenihan took a look at those in the room and listened to those who lobbied him in the corridor and decided that the Irish public should back these chancers who caused this problem. It also meant that the bank would stay open and FF in power so they could control the aftermath and limit their exposure. In other words all the wrong doers have a chance to cover their tracks and hopefully come out the other end. The tax payer is now the bank of choice for these pricks and as Lenihan says "no cheque is too big".
Nobel Laureate Stiglitz says EU Austerity is Wrong Bet
BUDAPEST - The European Union will prolong the global downturn if policymakers in the bloc's big economies insist on austerity measures to cut budget deficits, Nobel Prize winning economist Joseph Stiglitz said on Tuesday.
Stiglitz, winner of the Nobel Prize for Economics in 2001, said austerity as a policy to end the global crisis was a 'disaster', adding that Europe was heading towards more economic difficulties if politicians meant what they say when they promised to cut back spending rather than just trying to calm down markets. .
'If that (austerity) happens I think it is likely that the economic downturn will last far longer and human suffering will be all the greater,' he said.
Historical evidence showed that increased state spending rather than austerity measures can help economies emerge from recession, he said.
'In spite of all that evidence there is a drumbeat, particularly from many of the economists who were responsible for the crisis ... to focus on austerity,' Stiglitz told reporters on the sidelines of a conference.
He said the example of Ireland, a small economy, showed that austerity leads to declining output, rising unemployment and high bond spreads, instead of renewed investor.
'I feel sorry for the Irish people who have to suffer from this policy ... but it doesn't have global or European consequences,' he said.
'But if the UK, Germany or other countries do it, then it is going to have systemic consequences for Europe and the whole world,' he added.
Stiglitz said the real question Europe and the world faced was not whether the global economy was on track to a double dip.
'From the perspective of the world, or workers, there is very little difference between growth of a quarter point of a percent and a decline of a quarter point of a percent,' he said.
'What workers care about is if growth will be strong enough to reduce the high level of unemployment in the U.S. or Europe
this problem of indecisiveness over anglo and the banking fiasco in generalis being prolonged and is causing problems for our markets and industry.
the only upshot is that with a weak euro , we are experiencing increased exports to US and UK.
without this what would we be like.
After giving the guarantee and not having much left to cut of drain cash from now, the gov should be heavily taxing the banks that have returned to making largish profts already.
The banks should be helping bail us out by contributing multi millions towards the Irish economy.
If this can be stabilised then as the local market is /was getting back to some semblence of normality we could ride out the rest of the storm - as agencies are flat out busy as people are hiring again in a few different markets (unfortunatley these jobs are not going to help the construction workers/ unskilled workers).
I'm still not sure what long term pros and cons are to be had from abolishing or prolonging anglo.
the gov will have to make hard decisions that will ostracise them from their big supporters , but the rest of the country have suffered and the interests of the few cannot hold the interests of the entire population to ransom out of cronyism.
Quote from: lynchbhoy on September 08, 2010, 09:39:19 AM
but the rest of the country have suffered and the interests of the few cannot hold the interests of the entire population to ransom out of cronyism.
Evidently, they can.
Quote from: Zapatista on September 08, 2010, 09:43:21 AM
Quote from: lynchbhoy on September 08, 2010, 09:39:19 AM
but the rest of the country have suffered and the interests of the few cannot hold the interests of the entire population to ransom out of cronyism.
Evidently, they can.
up until now - but a decision is coming regarding anglo, and without personally knowning what the ros and cons are as I say - the lobbying seems to be in calling for closing it.
However Alan dukes (Fine Gaeler) disagrees with that- though he is chairman of anglo - maybe thats why he is saying this, otherwise I'd have tought he would call it how it is...or so how we are being told it is by the opposition, greens and a lot of others...
Quote from: lynchbhoy on September 08, 2010, 09:49:41 AM
up until now - but a decision is coming regarding anglo, and without personally knowning what the ros and cons are as I say - the lobbying seems to be in calling for closing it.
However Alan dukes (Fine Gaeler) disagrees with that- though he is chairman of anglo - maybe thats why he is saying this, otherwise I'd have tought he would call it how it is...or so how we are being told it is by the opposition, greens and a lot of others...
Exactly, up until now. This is all we have to judge the future decision on and there is no reason to think the personalities or there intentions or their methods will suddenly changed. Since it always has been we can assume that it will be. Anything else is fooling ourselves.
See below for a more positive spin from p.ie ...
Quite a good explanation of where we're at ...
http://www.politics.ie/current-affairs/137617-financial-hysteria-politics-ie.html (http://www.politics.ie/current-affairs/137617-financial-hysteria-politics-ie.html)
Financial Hysteria on P.ie
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A remarkable day (which I missed on P.ie) where a straightforward and relevant thread by grafter1 took off and the resultant traffic nearly sent the servers into meltdown. Has the Run on Ireland Begun?
However, I do feel that the contribution of certain posters on the doom and gloom variety are scaremongering in the extreme, and the impression given to casual viewers to the thread and to this forum in particular set a dangerous precedence in spreading a fatal and terminal lack of confidence in this country.
The purpose of this thread then, is to counteract any panic out there, and certainly offer a more sober and I feel, more accurate perspective of what direction this country is going in over the next 10 years.
Paramount behind all this would be a desire not to let the current government and the previous administrations off the hook. This crisis is very much of our own making, and the blame for that can be put fairly and squarely on the collective shoulders of Fianna Fail and their junior partners. It is also important to understand that the decisions made by the current government have largely served to make the situation far worse by their inaction, ineptitude and downright lazy governance.
Feel free to disagree on any analysis or correct me on any figures given.
1. The issue with bonds.
In this financial year we will need to raise about €20b in sovereign bonds. The current interest cost to sell 10 year bonds is ~6%. If the interest in repaying these bonds continues at that level or increases in cost then we can no longer continue to go to the markets to raise the capital we need to keep this country afloat.
This serves the interests of no-one, including the international financiers who purchase our bonds. If we reach the point of no return, we will then approach the ECB and avail of their bond equivalent at a much lower interest rate of 5%, much as Greece has done.
Unlike Greece, we have a functioning open market economy. As the European and American economies slowly recover, so too will ours. Obviously this has a drawback as well, because so much of our growth is export driven, we need a growth level in the order of 3.5-4% in order to expand the workforce, so in the short to medium term the outlook for unemployment is very bad indeed. But what it does mean is that the our deficit, in conjunction with the austerity measures, will reduce significantly over a period of 2-3 years. Therefore our borrowings (with the notable exception of the bank related ones) will become manageable.
In the interim, even though we have enough money to keep us afloat until spring of next year, the NTMA will continue to hold planned bond auctions and these will continue to be oversubscribed by investors. Because from their perspective, it is better for them to be getting a 5-6% cut in interest than the ECB.
In short then, while the interest rates on our bonds will continue to be punitive they will also be manageable.....just. And they will further narrow into 2011 in comparison with German ones.
2. The black hole of Anglo
We're nearly through with Anglo in terms of headline news. Anglo have a remaining 20b worth of loans to be transferred into NAMA over the next few months. Anglo have already provided for the loss on these loans, and according to Mike Aynsley, the discount they have allowed is between 60 - 65%. When you take into account the 10% LTEV and that the evaluations on the loans were based on 2009 prices, it's highly unlikely that the losses will be any greater. So the calculated €25b worth of losses that we have capitalised for is not going to budge much, if it budges at all.
There is no secret that the bank is going to be wound down now over an extended period of time, say 10 years. This will allow Anglo to sweat the loans and minimise their losses. Unfortunately the discount that Anglo have provided for these loans (20% to 38% depending on who you talk to) is woefully short. However, as these losses will only be realised over the lifetime of the wind-down they will not become immediately apparent and so will not have an immediate impact on our current financial crisis.
In short, Anglo, worst bank in history, worst banking resolutuion in history, is not going to bring the country down, although thanks to this governments moronic and stupid actions, its tried its damnedest.
3. The other financial institutions.
INBS will end up costing us €6b or so, our investment in BoI will pay off handsomely over time, believe it or not. EBS is nationalised and is costing us less than a €1b. IL&P survives to wave another green flag. Anglo in the end will be about €40b including interest. Which leaves AIB.
We've talked about this before, but it's important to raise the topic again. AIB are an international bank, there's a lot not to like about them, but they do run (when not run by John Rusnak) a very successful banking portfolio in America and an even better one in Poland. But because of the new capitalisation requirements from the regulator, they now have to sell off their best assets to a market that knows what the going rate is, and will ensure it gets a hefty discount. So the likelihood is that it will fall short in its recapitalisation targets, and worse still, when we have to recapitalise it from government funding, we will be doing so for a provincial backwater bank and not an international one.
This is the lunacy of government policy that drives me mad. But I digress.
The likelihood of the situation will be another funding issue for the State, McWilliams can sod off about this being a major issue for the government, we won't be talking about a lot of money here, and it is a genuine investment unlike the INBS and Anglo ones.
In short, the other financial institutions are not as bad, mean and dangerous as Anglo, they do highlight the fallacy on the governments banking strategy, but it's not a terminal issue.
4. NAMA.
NAMA was designed to free up the bad loan books in the banks, recapitalise them adequately to allow them to start lending, and finally over a period of 10 years either make a profit, or worse case scenario, break even.
Comprehensively NAMA will fail to deliver on any of these promises because it is fundamentally flawed, much of this down to the governments hedging of all bets to favour the banks and not the taxpayer.
However, much like Anglo, the debts realised to the Irish State will be sweated out over a 10 year, and possibly longer period of time. This allows the true lack of worth and the hole we therefore need to fill it in with, financially speaking, a lot more manageable.
This, and the other elements shows that where possible, the government is seeking to back-end our debts in order to pay them off as part of our national debt in the longest time-frame possible. While this has merits (the alternative is insolvency), it will mean that the cost to the taxpayer will be higher because of the interest charged on our extended borrowings.
But it does mean that we will survive.
There are a lot of positives about this country, it is very easy at the moment to run us down, and we're got the self-destructive genes to allow us to do so. But we will recover over time. The legacy for the mismanagement of our economy over the last 14 years will be a stigma on our economy and on our collective tax burden for a generation or more, and the parties guilty for this must be seen to be given justice. But please, do not run us into the ground by talk and conjecture alone.
WE DON'T HAVE AN ECONOMIC POLICY, IT'S ALL JUST A BIG BLUFF
September 8, 2010
by David McWilliams
ON THE radio on Monday, Brian Lenihan spoke of "not showing his hand" to the European Commission. He suggested that we in Ireland had to "hold our nerve". These phrases are not normally used in economic policy — rather, they come straight from the world of poker.
This language is appropriate as it probably best sums up the Government's policy throughout the banking crisis — it has all been a big bluff.
Yesterday, the financial markets reacted to the gambler's words by selling Irish bonds, thus driving the yield (at one stage) up from 5.78pc to 6.15pc.
Yields came down to 6.01pc, following rumours that the European Central Bank was buying Irish bonds. We are fast becoming a vassal state of the ECB, the only institution prepared to buy Irish bonds.
The ECB is doing this for one reason — to protect the bondholders of Anglo from the default which has to come. In this little game, we issue expensive IOUs at 6pc that the ECB buys with money it prints for nothing to keep open zombie banks that don't lend. The ECB is doing this not to protect you, but to protect rogue creditors who have no right to expect that they will be paid.
This policy will not only ultimately bankrupt us but will leave us with an economy where small domestic business is hollowed out by the credit crunch, the public sector will be kept on a life-support machine for as long as possible and only the capital-intensive multinationals will thrive. But ultimately for the multinationals, the tax on their workers' wages will act as a disincentive for them to invest.
When we get real, we will see that Anglo's debts are likely to be in the region of €36bn — or roughly 50pc of its loan book of €72bn. As the bond market indicated yesterday, we are clearly running out of time, and contrary to the minister's assurances, no one thinks the €25bn bailout of Anglo is "manageable". This cavalier attitude to finance is frightening away proper investors. This is exactly how the Greek crisis started and we know how that ended.
The Government is bluffing with our future, and by extending the guarantee yesterday it is simply showing all the signs of panic, rather than firm financial management.
The guarantee, when it was introduced nearly two years ago, was a bluff. It had to be. There was no way Ireland could afford to bail out our banking system — one of the smallest banks in the system has gone properly bust — and despite Mr Lenihan insisting that it will be manageable, it has led to the 'New York Times' questioning whether Anglo will bankrupt this country.
Imagine what would happen if one of the two clearing banks went to the wall. There is no way we could afford it and no way that we ever could have afforded it.
The guarantee was a credible bluff two years ago. Now, however, it is far too dangerous and should be dropped unilaterally because to preserve it risks a much greater fiscal crisis. More egregiously, the guarantee is undemocratic. Lumbering the people with the sins of creditors, bankers and developers is unfair and totally unworkable.
This is why the markets are selling Ireland. They have no interest in the bonds of a country whose people have been betrayed by their Government.
AT THE moment, the official position of the Government is that there is no alternative to paying off everyone who ever lent money to Seanie and his gang.
This is complete nonsense and proves the point that this Government actually has no idea what it is talking about. Once you realise that the Government's experts know nothing, then the picture becomes very clear. By the way, they also knew nothing in the boom, when they predicted that we would have a soft landing.
The proclivity of the Department of Finance to bluff and build up straw-man arguments is not new. Using fear as a policy to lumber the people with the mistakes of Ireland's institutions is a recurring theme.
At the moment, the canard that is being used by the elite to bully the people is that if we do the right thing and get those who lent to Seanie and the gang to bear the loss, we will lose credibility and there will be a knock-on effect on the creditworthiness of the rest of our society. How could this possibly stand? How could it be credible to make people who didn't make the loan, pay for the mistakes of people who did? Please explain.
The reason the elite can't explain is that they have no answer to it. They are bluffing. But why are they spoofing and making such momentous decisions on the hoof?
The most logical explanation is that they cannot handle the truth — that we are close to bankruptcy and can't afford the bank bailout. But admitting that we have severe problems involves an adult characteristic called responsibility. In Ireland, the little people are responsible, while our tiny elite of leaders are so craven that they will never admit they messed up. So instead, we get spin.
I am reminded of the last financial crisis of 1992-93. Back then, when it was first suggested that the Irish punt be devalued, the elite in government circles argued that if we devalued we would become an international pariah.
The spin from the establishment was that a devaluation would constitute a massive blow to the credibility of the State. Investors would never forgive us and the interest rate in Ireland would spike upwards to reflect the new currency risk. If we devalued, the bond market would close for Ireland and a recession would follow.
When we eventually devalued, having sworn up to the last that we wouldn't, what happened? Precisely the opposite to what had been predicted by the elite. Money flowed into the country, interest rates fell, inflation fell, bond yields fell and the economy took off.
The markets took the opposite view to the elite. It transpired that the markets didn't give a fiddlers about credibility, they just wanted the crisis to be over.
Once we devalued, the markets concluded: "Ireland has had its crisis, the air is cleared, now let's go and make money there." And this is what happened. The crisis came and went and then the economy rebounded.
We should tell the creditors of Anglo, including the ECB and our own Central Bank, that the game is up and the people won't pay. The Irish market would rally and the credit crunch would begin to ease.
That's how crises end — when someone makes an adult decision and takes responsibility.
Quote from: Zapatista on September 07, 2010, 11:41:30 PM
"I think this place needs a little bit of Belfast efficiency"
http://www.youtube.com/watch?v=10vlFBPeISM
some interesting comments by mcwilliams - some I think are sensationalist and ott,
eg imo the stockmarkets are a big game of poker so this isnt unusual.
the actual end game here is what we shoul dbe looking at.
whats going to cost us money and what will avoid costing us money
will deleting the anglo cost us more than keeping it
or if we write it off over a period of time, the money might be more, but the cost isnt immediate like an instant write off will cost us - and we have no money in the coffers to pay for such a write off and keep Ireland inc. chugging along.
also I would have thought that in the euro , we dont have the option of devaluation open to us ? Or is he talking about devaluation of other things?
The gov strategy is obv to keep afloat and in a few years time we will rectify ourselves.
This is fine and will work, but if something else hits us - what then?
We are prone during this period of time.
The economy is trying to recover, but like a crab in its shell, as soon as theres a loud noise it retreats back into its shell - as long as we have the banks problem as our 'noise' rearing its head every few weeks/months, the economy will not get a chance to get out and fully prosper other than in fits and starts.
Barring taking taxation off banks and most likely increasing taxes on the workers of Ireland, all we have left is to sell off things -
the only other alternative is investment in creating electricity (via hydro, wind or nuclear) to sell off to mainland europe and uk etc.
or other such enterprises as this. The gov wont or cant spend anything right now as they dont seem to have it.
Frills will have to be cut during next budget, some public service departments can take a temp closedown and the money would be beneficial to the exchequer.
Building of roads and schools etc would also be a smart investment programme as the money would be recouped in taxes .
Stark reality of losses at AIB and BoI must be faced
OPINION: While all the focus has been on losses at Anglo Irish, the other Irish banks are in denial about the scale of State support needed. It is time to face the facts: the three viable banks need over €17 billion, writes PETER MATHEWS
LAST WEEK, the scary reports of liabilities at Irish banks centred on the colossal Anglo Irish Bank loan losses, the scale of which I (and other analysts) had been only too aware of more than a year ago. The focus on Anglo Irish was understandable, as far as it went. But the banking sector crisis is not just about Anglo. The Government is missing the bigger picture entirely.
The Irish banking system is analogous to a household's heating/plumbing system with inter-related boilers. The two big boilers are AIB and Bank of Ireland. There are other smaller boilers, including Anglo and Irish Nationwide, which got really badly damaged by using the wrong fuel and, as a result, they're now broken beyond repair. The correct decision now is to "stop-c**k" Anglo and Irish Nationwide out of the overall system, decommission them and wind them down, in an orderly way, over a period of five to seven years.
AIB and Bank of Ireland (BoI) are the economy's two heavy duty "main boilers". Both are now in highly unreliable condition, hissing and spluttering and stopping and starting unpredictably. Both need major refits and servicing. They are severely undercapitalised and poorly directed and managed. Yet both persist in pretending they're in reasonable shape. They are not. And that's absolutely the case for BoI, notwithstanding the insistent protests that it is okay because it has more or less raised the capital amount indicated as adequate last March.
But that was last March. And last March's estimates for both AIB and BoI were not enough. BoI needs €6.5 billion, not €3.65 billion. And AIB needs €10 billion, not €7.4 billion.
The proof goes along the following lines. Gross loans in AIB listed for transfer to the National Asset Management Agency (Nama) totalled €24 billion. A (light) 40 per cent writedown on this figure amounts to €9.6 billion, which should be rounded at €10 billion. We note also that AIB will have to absorb large further losses on its mortgage loan book, its corporate loan book and its SME book and also on its personal lending portfolio. In addition, it may well have uncovered exposures on derivatives. For these reasons, and extensive relevant professional experience, I feel conscience bound to point out that AIB definitely needs recapitalisation now of not less than €10 billion. Furthermore, AIB should not be selling its stakes in Polish and US banks. They are the most profitable, cash-flowing parts of AIB. AIB is only doing this as a panic measure to try and plug its deepening capital shortfall.
Similarly, BoI needs a €6.5 billion recapitalisation. Why €6.5 billion? Because in BoI, the listed loans for transfer to Nama were €16 billion. Apply a 40 per cent write down. This amounts to €6.4 billion, which should be rounded to €6.5 billion. All comments applicable to AIB in the preceding paragraph apply also to BoI.
The Educational Building Society (EBS) also needs recapitalisation of €1 billion to cover its loan losses. Four months ago, the Oireachtas Joint Committee on Finance and the Public Service was advised that the three viable banks, AIB, BoI and EBS, needed immediate capital of €10 billion, €6.5 billion and €1 billion. That's €17.5 billion in total. The question arises: should the State provide all of this on top of the €7 billion already invested in AIB and BoI in 2009? Clearly not. How much of this €17.5 billion should the State invest? Perhaps €11 billion, in appropriate proportions, into AIB, BoI and EBS.
All of this will result in temporary State nationalisation of these three banks. This leads to another question: where will the €6.5 billion balance come from? The State will be in majority control, at levels in excess of 85 per cent, and able to force existing bondholders in AIB, BoI and EBS to take writedowns on their holdings of bonds, while maybe offering them, say, a small debt-for-equity swap as a sweetener to soften the blow. After, say, five years, the banks will have regained reasonable annual-maintainable normal profit levels in the range €3.5 billion to €4 billion, putting the State in a good position to realise, by way of stock exchange or private sales, its investment of €18 billion in these three banks, plus a profit.
Temporary nationalisation of AIB and BoI will merely formalise the reality that, without 100 per cent State support, both are insolvent. Removal of the State guarantee on deposits at this point would lead to a run on the banks' deposits. However, we see the banks continuing their delusory charade that they are financially sound and independent!
Realism and optimism are essential for recovery. But optimism must be based on reality. As a country we're facing a stark reality. Protracted denial in the banking industry, the Government, official Ireland and the professions must stop. Unfortunately, the Fianna Fáil-led Government is responsible for the financial destruction of our economy. Regrettably, the Green Party has collaborated in this destruction. These are the facts. The true situation has been denied by the Government for far too long.
Finally, after two years, only in the last few days have the Minister for Finance, the Government and (some of) the banks been forced to admit the true scale of the destruction. What a waste. What a shame.
So let's stop the stupid denial. Let's acknowledge the scale of destruction in the Irish-owned banking sector, not just the Anglo Irish story. AIB and BoI have not been honest with us. Their loan losses are also a shock-and-awe story and they're only being revealed, on the drip, in drawn-out chapters.
Let's measure truthfully all the appalling financial damage. Let's insist AIB and BoI are recapitalised at the truthful, honest, correct and much more robust levels (thereby resulting in temporary nationalisation and bondholder participation through bond writedowns) to enable them to make necessary, much larger, loan-loss provisions than they've done to date. Let's reverse the nonsensical, unwieldy Nama project. This can be done speedily and simply. We've got to stop what has become a slow-motion Nama/banks bailout nightmare. Let's roll up our sleeves and face the challenge. And let's get on with the work of recovery