NAMA vs. WW1 Debt

Dannyboy83

If Germany had kept up repayments for WW1 under the Versailles treaty, it's estimated that it would have taken 3 generations to pay the debt off.
They would have finished repaying the debt sometime around 1998.
So about 80 years worth.

I'm just wondering if anyone has a similar type comparison for all the debt we have recently incurred here in Ireland between NAMA and everything else?

How many years will it take?
20?
40?
60?

OMD

Dannyboy83 wrote: »

If Germany had kept up repayments for WW1 under the Versailles treaty, it's estimated that it would have taken 3 generations to pay the debt off.
They would have finished repaying the debt sometime around 1998.
So about 80 years worth.

I'm just wondering if anyone has a similar type comparison for all the debt we have recently incurred here in Ireland between NAMA and everything else?

How many years will it take?
20?
40?
60?

Why do you say NAMA not deficit?

Dannyboy83

OMD wrote: »

Why do you say NAMA not deficit?

Can say deficit if you prefer.

Scarab80

Dannyboy83 wrote: »

If Germany had kept up repayments for WW1 under the Versailles treaty, it's estimated that it would have taken 3 generations to pay the debt off.
They would have finished repaying the debt sometime around 1998.
So about 80 years worth.

I'm just wondering if anyone has a similar type comparison for all the debt we have recently incurred here in Ireland between NAMA and everything else?

How many years will it take?
20?
40?
60?

The loans taken into NAMA will pay off the debt, we won't. Remember NAMA has taken unimpaired loans aswell as impaired loans. If there is a shortfall at the end of 10 years it will be minisule in comparison to 10 years of government deficit.

The real question is how long it will take to pay off the accumulated debt of our annual current deficits.

sinnerboy

It took the UK 60 years to repay WW2 debts

http://news.bbc.co.uk/2/hi/uk_news/6215847.stm

How do our debts compare in magnitude ?

Meaning - the accumulated debt of our annual current deficits

.

Permabear

This post has been deleted.

ei.sdraob

sinnerboy wrote: »

It took the UK 60 years to repay WW2 debts

http://news.bbc.co.uk/2/hi/uk_news/6215847.stm

How do our debts compare in magnitude ?

hows this for a grim picture

* ntma.ie says 82 billion debt on their site

* we need to repay 75 billion within the next 15 years (that's an average of 5 billion a year going out the door....)

* this year alone we have to borrow close to 20 billion (adding another 3-4 years to the above)

so assuming we balance the books before December (like thats gonna happen :rolleyes:) we be paying back debts for next 20 years at least

of course the plan is to reduce deficit to 3% over next 5 years (will it happen? given the past track record?? and the severe cuts involved)

and then of course there's any losses occurred by NAMA and the banks we now own, and god forbid a "NAMA for greedy fools"

we are easily looking at 30 years of repaying debt

oh and in 30 years we will have an ageing population that would require (be "entitled" to...) healthcare and pensions

were fuucked :eek:

sinnerboy

That is compelling and scary . Who ultimately owns all this debt . It is plain it will not be repaid . So who is not getting payback . ?

And what then ?

ei.sdraob

sinnerboy wrote: »

That is compelling and scary . Who ultimately owns all this debt . It is plain it will not be repaid . So who is not getting payback . ?

And what then ?

Banks (remember these are nationalised now), hedge-funds, pensions
some are Irish some are not...

inflation might wipe some of it off

but yes everytime some muppet starts calling for a "NAMA for XYZ" politely point them to the NTMA site and remind them that they and their children will be paying for that one way or another

woodseb

what happens with most government debt is that some of it is repaid and the rest is refinanced when it comes due - we won't be paying all of it back for a long time

ei.sdraob

woodseb wrote: »

what happens with most government debt is that some of it is repaid and the rest is refinanced when it comes due - we won't be paying all of it back for a long time

like they did last year rolling over 5 billion onto a higher interest...

we should just continue to borrow like mad, give all our public servants a big benchmarking bonus, bailout everyone who lost anything on their investement > mortgage holders, shareholders etc

and when no one is willing to lend to us anymore, we should throw a hissy fit < burn a few bankers alive, and lo and behold money will pour in from IMF and EU with no strings attached

OMD

The answer is never. Debt is continually repaid and more taken out. Even during the boom our amount of debt was more or less the same at the end as at the start. It appeared to reduce as our GDP rose.

oppenheimer1

woodseb wrote: »

what happens with most government debt is that some of it is repaid and the rest is refinanced when it comes due - we won't be paying all of it back for a long time

It will be never paid back, just continually rolled over and refinanced. Borrowing is not a problem as long as you have creditors willing to lend.

oppenheimer1

ei.sdraob wrote: »

like they did last year rolling over 5 billion onto a higher interest...

we should just continue to borrow like mad, give all our public servants a big benchmarking bonus, bailout everyone who lost anything on their investement > mortgage holders, shareholders etc

and when no one is willing to lend to us anymore, we should throw a hissy fit < burn a few bankers alive, and lo and behold money will pour in from IMF and EU with no strings attached

No strings attached, are you aware of the track record of the IMF?

ei.sdraob

oppenheimer1 wrote: »

No strings attached, are you aware of the track record of the IMF?

whooosh :P

Flamed Diving

Reparations were £23.6 Billion in 1919, according to FACTpedia.

Using the GDP deflator tool at www.eh.net, this is worth in 2007 prices:

£952,000,000,000

Annuity formula:



In this case, choosing a rate of 1%, paid quarterly for eighty years:

[latex]A = 952,000,000,000(0.0025 + \frac{0.0025}{(1+0.0025)^{320}-1})[/latex]

A = £4,325,524,976 paid, per quarter for eighty years. Yipes.

So, let's look at the NAMA debt for the same formula:

[latex]A = 82,000,000,000(0.0025 + \frac{0.0025}{(1+0.0025)^{320}-1})[/latex]

A = €372,576,731 paid, per quarter for eighty years. But we are paying about 4.5% interest for 10YR bonds, right now.

[latex]A = 82,000,000,000(0.01125 + \frac{0.01125}{(1+0.01125)^{320}-1})[/latex]

A = €948,955,424 paid, per quarter for eighty years.

For those of you wondering what the big fuss about bond yields is, look at the difference between a 1% loan and a 4.5% loan.


Let me know if you spot an error. (Thanks namenotavailabl)

Head The Wall

Your fonts are all over the shop

namenotavailablE

@ Flamed Diving: Is the interest rate in the denominator correct?

I may be incorrect in my reading of it but isn't the 4.5% rate an annual rate of interest? Wouldn't you need to convert it to a quarterly rate so it should it be 4.5%/4 = 1.125% instead of 4.5% 'flat' as there are 4 payments per annum.

Flamed Diving

namenotavailabl wrote: »

@ Flamed Diving: Is the interest rate in the denominator correct?

I may be incorrect in my reading of it but isn't the 4.5% rate an annual rate of interest? Wouldn't you need to convert it to a quarterly rate so it should it be 4.5%/4 = 1.125% instead of 4.5% 'flat' as there are 4 payments per annum.

Ah, I'm 'amortified".

I will fix it now.

namenotavailablE

Another one to chew on - what is the correct figure to use for the principal amount?

Shouldn't the principal in your calculations refer to the value of bonds issued by NAMA (since this is the amount we are borrowing and on which we are paying 4.5% interest) rather than the (pre haircut) nominal value of the loans acquired (which if I'm correct is the €82 bln value used in the calculations)?

Having said all that, this scary calculation forcefully and usefuly illustrates in a very real sense the burden for the multiple generations ahead.

Scarab80

It's completely academic, the state is not going to be paying back 80bn.

hiorta

It is not so straightforward.
The type of interest repayment can add years and constantly increase the balance outstanding to the eventual total.

Flamed Diving

hiorta wrote: »

It is not so straightforward.
The type of interest repayment can add years and constantly increase the balance outstanding to the eventual total.

Feel free to provide your own estimates.

thebman

Scarab80 wrote: »

It's completely academic, the state is not going to be paying back 80bn.

Yes it will be more than that when you consider we will never pay it back and continue borrowing and paying interest on loans that if we were smart, we wouldn't really need.

Scarab80

thebman wrote: »

Yes it will be more than that when you consider we will never pay it back and continue borrowing and paying interest on loans that if we were smart, we wouldn't really need.

So you think that from about 81bn of loans, including performing loans, we will receive precisely zero from them?

You must also assume that as we paid 4.85bn for the first 10bn of loans we will pay 76bn for the remaining 71bn of loans desite Frank Daly saying that he would expect a similar discount on the remaining tranches indicating a total cost of 40bn?

Or maybe you are just being facetious?

Sand

So you think that from about 81bn of loans, including performing loans, we will receive precisely zero from them?

You must also assume that as we paid 4.85bn for the first 10bn of loans we will pay 76bn for the remaining 71bn of loans desite Frank Daly saying that he would expect a similar discount on the remaining tranches indicating a total cost of 40bn?

Or maybe you are just being facetious?

Youre talking about a loan portfolio so toxic that even with the discount on book value, getting the loans of the banks books improves the banks positions. Clearly, if the payout on these loans was going to be as positive as you imagine, it would be far more efficient to simply leave them with the banks, force an appropriate mark down and save the immense legal and admin fees of NAMA.

Someone got screwed on the NAMA deal. Given the taxpayer wasnt represented at all, its pretty clear it was us.

Scarab80

Sand wrote: »

Youre talking about a loan portfolio so toxic that even with the discount on book value, getting the loans of the banks books improves the banks positions. Clearly, if the payout on these loans was going to be as positive as you imagine, it would be far more efficient to simply leave them with the banks, force an appropriate mark down and save the immense legal and admin fees of NAMA.

Someone got screwed on the NAMA deal. Given the taxpayer wasnt represented at all, its pretty clear it was us.

The taxpayer was represented by the board of NAMA. Given that the discount applied was 20% in excess of the banks estimates i would say that the taxpayer got the better deal, remember the banks agreed to transfer loans to NAMA before the final discount was known.

The benefits that the banks have in transferring loans is that they now know what the value of their loan book is and they have also received cash so that they can meet their equity reserve requirements. The banks did not have the liquidity required to service these loans (for example there are cases where developers have contracted tenants to move into properties that are partially completed, construction had stopped on these properties due to a lack of funding), the state is able to take a longer term more pragmatic view.

Sand

The taxpayer was represented by the board of NAMA.

No, they werent. The NAMA board was appointed by Brian "I didnt read the report" Lenihan, Minister for Bankers. It contains reassuringly honest men like Steven "Masterfully vague" Seelig, Frank Daly of Anglo Irish public interest fame and a former senior manager of Bank of Ireland, Michael Connolly along with an assembly of other vested interests. The Irish taxpayer was not represented at all - the closest to to representation we came to was the EU being absolutely mortified by the scale of the theft being planned and forcing Lenihan to try and make it a little less blatant.

Given that the discount applied was 20% in excess of the banks estimates i would say that the taxpayer got the better deal, remember the banks agreed to transfer loans to NAMA before the final discount was known.

Given the banks are obliged to act in shareholder interest (at least nominally) and theres nothing to compel participation in NAMA, the banks participated willingly, and they got the better end of the deal.

I'm tired of arguing this point with the blind. The taxpayer got ****ed. Thats the entire point of NAMA. The taxpayer takes the pain, the bankers skip off free to create another financial disaster 10-20 years down the tracks. Feel free to buy me out of my participation in NAMA, and you can claim my share of the "profits".

The benefits that the banks have in transferring loans is that they now know what the value of their loan book is

Laughable. Completely and totally laughable.

The "benefit" you describe could have been reached by simply marking down the loans to market value (yes, market value...that dreaded, forbidden word). The entire cost of NAMA would have been saved by simply appointing a proper audit team and sending them in to apply some reality to the books. The banks didnt want to do that because it would show them up as being insolvent.

So instead the makey uppy concept of LTEV was invented, taken straight from the Enron accounting playbook.

they have also received cash so that they can meet their equity reserve requirements

Theyve received Irish government debt. Given the epic scale of our budget deficit and the economic incompetence of our government, theres a certain comic value in that. Irish government debt, its as good as gold. Right?

The banks did not have the liquidity required to service these loans (for example there are cases where developers have contracted tenants to move into properties that are partially completed, construction had stopped on these properties due to a lack of funding), the state is able to take a longer term more pragmatic view.

When you refer to the state, you mean the taxpayer...theres epic losses on the way, but sure we can always milk those donkeys for some more cash to finish off those 4 bed semi Ds in the middle of Leitrim!

Seriously, are you Frank Fahey? Maybe Donie Cassidy?

“We have a duty to tell first-time house buyers, young couples with no previous experience, that there is unbelievable value in the marketplace today. It will not last forever… I will remind the House, perhaps in 12 or 18 months, when prices have again increased by 25% or 30%, that they were told this by the Leader of the House on this historic day, the tenth anniversary of the Good Friday Agreement.”
- Senator Donie Cassidy, April 2008.

My offer to buy me out of my participation in NAMA still stands. Cmon, youre so confident, surely youd be snapping up my offer to double your winnings?

Scarab80

Sand wrote: »

My offer to buy me out of my participation in NAMA still stands. Cmon, youre so confident, surely youd be snapping up my offer to double your winnings?

No problem, find an internet escrow account.

Sand

Place it here, in my name.

Lets see, NAMA will splash out an estimated 54 billion. I am one of 1.9 million taxpayers in the state so my stake would be 28, 421 Euro or so. If we make any profit back on that...well, we all know that isnt going to happen.

Oh, I forgot - the 54 billion is just the estimated spend on the portfolio in issuance of new debt. It doesnt include the legal or admin fees. Ah well, details...

Dannyboy83

So 30 years seems to be a fairly neutral estimate then.

Regarding the comments about how we won't pay it back and let inflation take care of it, I was under the impression that we have to get back in line to stay within the EMU;

e.g.
The total public debt, has to be less than 60% of GDP.

I was under the impression we are already far in excess of this, especially considering that NAMA can no longer be kept off the balance sheet as the EU originally agreed to.

Scarab80

Sand wrote: »

Place it here, in my name.

God, are things that bad

Sand wrote: »

Lets see, NAMA will splash out an estimated 54 billion. I am one of 1.9 million taxpayers in the state so my stake would be 28, 421 Euro or so. If we make any profit back on that...well, we all know that isnt going to happen.

Probably going to be closer to 44bn at this stage,

81bn loans x 49% consideration = 39bn + 5bn further working capital to be advanced to complete building.

Sand wrote: »

Oh, I forgot - the 54 billion is just the estimated spend on the portfolio in issuance of new debt. It doesnt include the legal or admin fees. Ah well, details...

Actually it does, there is a 5.25% upfront deduction for professional services.

Scarab80

Dannyboy83 wrote: »

I was under the impression we are already far in excess of this, especially considering that NAMA can no longer be kept off the balance sheet as the EU originally agreed to.

When did this happen?

Dannyboy83

Scarab80 wrote: »

When did this happen?

Which?

recedite

We should use the last of the borrowed money to build up our armed forces.

Scarab80

Dannyboy83 wrote: »

Which?

The Eurostat decision that NAMA to be kept on the balance sheet.

Sand

@Scarab80

God, are things that bad

No, clearly theyre awesome. But on the off chance you were to buy me out itll go to a good cause that will spend the money in some economically useful fashion in this country, whilst NAMA will simply transfer a massive amount of taxpayer wealth to private interests outside NAMAland...Ireland . It'll also make you feel better when theres no profit whatsoever from NAMA.

Probably going to be closer to 44bn at this stage,

81bn loans x 49% consideration = 39bn + 5bn further working capital to be advanced to complete building.

Many people smarter than you or I have attempted to crack the code of NAMA and its business plan or methodolgy. Until the Rosetta Stone turns up, its better to accept the basic reality - NAMA will pay whatever is required to ensure the banks get enough assets to try and stay above water. I wouldnt hold too dearly to 49%. It wont survive contact with the reality that the government wants to ensure we get the trash and the banks get the bonds. That figure was 54 billion. That is no longer enough and the EU is as I said, the closest thing the taxpayer has had to representation, and has demanded some decency in the whole theft so the government has had to resort direct bailouts outside NAMA to get the necessarry taxpayer assets in the hands of their buddies in the banks.

Actually it does, there is a 5.25% upfront deduction for professional services.

Not included in the 54 billion. As above, that was the original figure that the government calculated they needed to get to the banks. If anything, its risen.

When did this happen?

He is probably referring to the direct bailouts of Anglo Irish being written off by Eurostat as spending, not an investment. NAMA got a few of the old Enron boys on board to create a SPV to maintain the fiction that NAMA is not a liability of the Irish taxpayer.

Except it is.

Eurostat accountancy rules are the least of our worries. Regardless of what they say, we still owe the banks on the bonds we are giving them. The irony.

Scarab80

Sand wrote: »

NAMA will pay whatever is required to ensure the banks get enough assets to try and stay above water.

The government will pay whatever is required, evidenced by the recapitalisations and Anglo/INBS bailouts after the due dilligence performed on the first tranche of loans and it was realised that the quality of security meant a bigger discount. If this was a big FF scam why not pay the 30% discount and worry about the fall out of NAMA losses 10 years down the line?

Sand wrote: »

I wouldnt hold too dearly to 49%. It wont survive contact with the reality that the government wants to ensure we get the trash and the banks get the bonds. That figure was 54 billion. That is no longer enough and the EU is as I said, the closest thing the taxpayer has had to representation, and has demanded some decency in the whole theft so the government has had to resort direct bailouts outside NAMA to get the necessarry taxpayer assets in the hands of their buddies in the banks.

The reason the government has had to resort to direct bailouts was because the due dilligence discovered that the loans were not worth 54bn.

Now there is something we could have a friendly wager on as the loan transfers will be completed by the end of the year or Feb 2011 at the latest.

Sand wrote: »

Not included in the 54 billion. As above, that was the original figure that the government calculated they needed to get to the banks. If anything, its risen.

Well based on what i think NAMA will pay the banks plus direct bailouts they will have recapitalised to a value of 87bn.

Sand wrote: »

Eurostat accountancy rules are the least of our worries.

Well we can definitely agree there