Economic Crisis Part 2 - The Sucker Punch (Morgan Kelly predicts a run on the banks)

ei.sdraob

writes Morgan Kelly...

Even under the most optimistic assumptions about government spending cuts and bank losses, by 2012 Ireland will have a worse ratio of debt to national income than the one that is sinking Greece.

It is hard to think of any institution since the League of Nations that has become so irrelevant so fast as Nama. Instead of the resurrection of the Irish banking system we were promised, we now have one semi-State body (Nama) buying assets from other semi-states (Anglo) and soon-to-be semi-States (AIB and Bank of Ireland), while funnelling €60 million a year in fees to lawyers, valuers and associated parasites.

some more doom and gloom on this beautiful and sunny day today :P

http://www.irishtimes.com/newspaper/opinion/2010/0522/1224270888132.html

READ IT!! ^^^^

IT IS no longer a question of whether Ireland will go bust, but when. Unlike Greece, our woes do not stem from government debt, but instead from the government’s open-ended guarantee to cover the losses of the banking system out of its citizens’ wallets.

Even under the most optimistic assumptions about government spending cuts and bank losses, by 2012 Ireland will have a worse ratio of debt to national income than the one that is sinking Greece

There will be a second banking crisis here/an invoking of the guarantee which will put an end to our shennannigans. It will be caused by a backlog of defaulters.

More than 53,000 borrowers took out interest-only mortgages from 2004 to 2008, according to figures from the Department of the Environment.

The numbers peaked in 2007,when 13,605 people took out interest-only mortgages, representing more than 15 per cent of mortgages sold that year.

The numbers taking out interest only mortgages fell to 8,308 in 2008, representing less than 15 per cent of new home loans that year. The large number of interest-only loans sold at the peak of the boom compares with just 3.3 per cent a decade earlier in 1997.

Most interest only-loans are believed to have been sold to buy-to-let investors, though mortgage brokers report that some borrowers also bought their private residences on an interest-only basis, particularly if the mortgage was greater than €500,000.

http://archives.tcm.ie/businesspost/2009/11/08/story45450.asp

“In some cases, nonperforming loans are built up slowly over time and financial sector problems arise gradually rather than suddenly. Japan in the 1990’s is a case in point. While nonperforming loans had been increasing since the early 1990’s, they reached crisis proportions only in 1997”.

Systemic banking crises: A new database
http://www.imf.org/external/pubs/ft/wp/2008/wp08224.pdf

http://www.thepropertypin.com/viewtopic.php?f=19&t=2281

You have been warned!

gandalf

Discussing on that article already started here.

http://www.independent.ie/business/personal-finance/property-mortgages/concern-as-38pc-of-home-loans-are-90-days-in-arrears-2188451.html

Irish mortgage arrears rose in March and the rate of loans being paid off remained stubbornly low as homeowners struggle with rising unemployment, according to international rating agency Moody's.

just remember this crap the govt is saying about turning a corner is rubbish, liars and thieves. We are nowhere near getting back up on our feet - businesses are failing

http://www.irishtimes.com/newspaper/breaking/2010/0405/breaking22.html

34 per cent increase in the number of companies placed in liquidation, receivership or examinership in the first three months of the year when compared with the same period last year.

^^ Nothing is improving :mad:

johnnyskeleton

Morgan Kelly wrote:

However, in contrast to its inept handling of the banking crisis, the Government has taken reasonable steps to bring the deficit under control. If all goes to plan we should be looking at a debt of 85 to 90 per cent of GDP by the end of 2012.

That doesn't sound much like Morgan Kelly.

3.5bn out of a deficit of c. 20bn is perhaps a good start, but it's what the government should have done in budget 2007/8. They should also be looking to even greater cuts next year, rather than what they have promised which is pretty much minimal change on the hope that the tax take magically rises.

lawyers, valuers and associated parasites.

Well! Who got out of the bed on the wrong side this morning?

We should have let the banks fail, created new ones and made all the deficit cuts in one go. We would have turned the corner by now

johnnyskeleton

Deleted User wrote: »

We should have let the banks fail, created new ones and made all the deficit cuts in one go. We would have turned the corner by now

My attitude then as now is that we simply have not been given sufficient information to be able to make that decision. The government has that information but won't release it. MK's analysis is based on speculation and is probably correct (if anything very much on the conservative side) but it's easy for the government to dismiss because he doesn't have the actual information.

Also, letting them fail has the advantage that if it doesn't work out it can be reversed pretty easily by simply pumping them back up. The same cannot be said for the prop up the banks at all costs approach, which has us trussed up like a christmas turkey.

I think the biggest crime committed in Ireland over the last few years is concealment. They might justify it on the basis that it would spook international markets, but on the other hand, it is their excuse for doing dodgy deals to the detriment of the people.

sceptre

Thread title amended for clarity (parenthesised bit added)

ardmacha

That doesn't sound much like Morgan Kelly.

3.5bn out of a deficit of c. 20bn is perhaps a good start, but it's what the government should have done in budget 2007/8. They should also be looking to even greater cuts next year, rather than what they have promised which is pretty much minimal change on the hope that the tax take magically rises.

every one bashes on here about cutting this and that, cuts which aggravate the deficit as well as curing it. In fact cutting has been at a broadly appropriate level, which some people are unwilling to accept no matter who says it.

but the banking crisis distinguishes Ireland from Greece and if we f**k u there then all of cuts will be in vain. The banks should be allowed default rather than the State.

WalterMitty

FF are just managing the situation till the next group get into government,they are solving very little. If everything gets much worse when they are out of power they can claim FG/LAB made things worse.

silverharp

some gallows humour

http://www.abc.net.au/news/video/2010/05/20/2905304.htm

OMD

Morgan Kellys figures assume all losses by banks are to be covered by the government and make no account of funds raised by banks or bank profits in other sectors.

Why does he feel losses on property development loans will cost the government €33 billion in the next 2 years? (as distinct from 10 years). Doesn't NAMA at least put off the losses into the future.

Sand

@blindjustice

We should have let the banks fail, created new ones and made all the deficit cuts in one go. We would have turned the corner by now

We would certainly have moved past worrying about the banks and on to worrying about growth and employment. Instead, all our efforts have been diverted to a pointless diversion which is doomed to fail. Our banks are too big to save when weighed against the States own serious fiscal problems.

The banks arrived up in September 2008 threatening doom, terror, plague, famine and biblical judgement upon the people of Ireland should the stakeholders in the banks face up to their losses. We were represented by Cowen, who was and remains shellshocked, and Lenihan who was a green rookie with no experience trying to learn on the job, who had more knowledge of legalities than economic necessities. So they blinked first.

And now, to quote the great and the good, we are where we are. The banks and their interests have taken priority over everything else.

There is still a possibility to extricate our selves from this slow motion car crash: introduce banking resolution legislation as a matter of urgency, repeal the bank guarantee or allow it to expire, and offer the banks either a reversal of NAMA or a default on the "NAMA" bonds. The German private banks take a hit, Germany bails them out (or doesnt) directly with a lot less political difficulty than they have bailing them out indirectly via Greece.

The above might seem extreme or difficult to do, but the priorities of the state have to come before the priorities of the German bankers that lent money to morons like Seanie. NAMA was difficult to do, but they got it through every possible constitutional, political, moral, ethical barrier. No reason the same cant be done for better purposes.

johnnyskeleton

ardmacha wrote: »

every one bashes on here about cutting this and that, cuts which aggravate the deficit as well as curing it. In fact cutting has been at a broadly appropriate level, which some people are unwilling to accept no matter who says it.

I say it based on the committment/requirement that the deficit be brought back to within 3% by 2012. That gives us only one more budget to reduce the deficit from c. 13% to 3%.

Even if it is extended to 2014, it seems equally unlikely we will be back to 3% by then.

ei.sdraob

im gone for few hours and someone changes my title

i preferred "IT IS no longer a question of whether Ireland will go bust, but when" ...

johnnyskeleton

ei.sdraob wrote: »

im gone for few hours and someone changes my title

i preferred "IT IS no longer a question of whether Ireland will go bust, but when" ...

Although you're quicker off the mark, you must admit bjb has a better way with thread titles!

RichardAnd

Morgan Kelly most likely didn't just pull this article out of his back side, it is probably a well thought out and honest assessment based upon his own opinions and experience. But I can guarantee that another economist with PHDs and MAs coming out his ears could form an opinion utterly opposite of this. Yet another seasoned by decades of experience might find a third.

It was an interesting read all right but as I've always said, one must take the opinions of academics with a pinch of salt. Morgan Kelly and those like him, though many of them are clever guys, are sitting up in the ivory tower looking down at the rest of us. They have a wonderful lofty view but a view is just a view.

No one should accept this article as solid, irrefutable truth because an economy is not a machine missing a few cogs, it is a vast and complex collection of a multitude of entities much like cells making up a plant. Like a plant, we can look at its sickly leaves, apply fertilizers and spread compost but no one can say precisely what shape it will take when it begins to grow once more.

My 2 cents.

RATM

RichardAnd wrote: »

It was an interesting read all right but as I've always said, one must take the opinions of academics with a pinch of salt. Morgan Kelly and those like him, though many of them are clever guys, are sitting up in the ivory tower looking down at the rest of us. They have a wonderful lofty view but a view is just a view.

.

Ah c'mon, did it matter that he was sitting in an ivory tower when he called the property maket as over heated and doomed and was proven correct?

I think some people are missing the point of this thread- Morgan Kelly said there would probably be a run on the banks .

He was referring to interbank loans but a bank not being able to borrow means there are much deeper effects. If a run happens in the interbank loan market you can be assured the public will panic and attempt to withdraw all their funds, they don't trust much thats coming out of the governments mouth ('We've turned a corner') and people may see the bank guarantee scheme as not worth the paper its written on.

If there's a run on the banks then you can expect mass scale panic- in the markets and in the streets. He seems to be me be predicting a forthcoming Black Friday and I hope for all our sakes he is wrong. But I find it frightening that now we have 2 economists who have predicted another collapse of the financial system- McWilliams did so in the SBP 3 weeks ago. Read into that what you will but both have been broadly correct in their analysis up until now.

Sand

Morgan Kelly most likely didn't just pull this article out of his back side, it is probably a well thought out and honest assessment based upon his own opinions and experience. But I can guarantee that another economist with PHDs and MAs coming out his ears could form an opinion utterly opposite of this. Yet another seasoned by decades of experience might find a third.

It was an interesting read all right but as I've always said, one must take the opinions of academics with a pinch of salt. Morgan Kelly and those like him, though many of them are clever guys, are sitting up in the ivory tower looking down at the rest of us. They have a wonderful lofty view but a view is just a view.

No one should accept this article as solid, irrefutable truth because an economy is not a machine missing a few cogs, it is a vast and complex collection of a multitude of entities much like cells making up a plant. Like a plant, we can look at its sickly leaves, apply fertilizers and spread compost but no one can say precisely what shape it will take when it begins to grow once more.

My 2 cents.

What part of his argument do you base your refutation on?

Or is the logic:

1 - Morgan Kelly is an economist.
2 - Economists can be wrong.
3 - Ergo, Morgan Kelly is wrong.

Morgan Kelly is not going to pick the winning lotto numbers next week, but hes a proven ability to analyse the available information and highlight the inconvenient truth. Remember the "soft landing" that was peddled a few years back? Now the line is that we have "turned the corner". Saying this wont make it so. Ignoring contrary conclusions drawn in an objective rational manner wont stop them from playing out.

And why should the opinion of academics be taken with a pinch of salt? That ivory tower you are referring to is objectivity. Brian Lucey was talking Eamonn Ryan on Newstalk this morning, and made a very telling point regarding the independant advice the Greens received from their economic advisors. The exchange went something along the lines of:

Lucey: Were your independant advisors Irish or foreign, and were they employed in "the market" or outside of it?
Ryan: They were Irish, they were independant, they were "in the market"
Lucey: And when you asked them if you should bail them out, what answer did you expect to get?

Academic economists can say what they like, which is why they are valuable. If Morgan Kelly was employed by AIB or Bank of Ireland he would have been fired years ago. All of the economists "in the market" are bought and paid to dress up positive spin for their employers. Thats their job. And if they forget that they are essentially PR spin, then they get fired. One of the primary issues with the media analysis of economic and financial matters over the past decade is that they have given biased market actors platforms for press release spin dressed up as some sort of independant commentary.

RichardAnd

Sand wrote: »

What part of his argument do you base your refutation on?

Or is the logic:

1 - Morgan Kelly is an economist.
2 - Economists can be wrong.
3 - Ergo, Morgan Kelly is wrong.

Morgan Kelly is not going to pick the winning lotto numbers next week, but hes a proven ability to analyse the available information and highlight the inconvenient truth. Remember the "soft landing" that was peddled a few years back? Now the line is that we have "turned the corner". Saying this wont make it so. Ignoring contrary conclusions drawn in an objective rational manner wont stop them from playing out.

And why should the opinion of academics be taken with a pinch of salt? That ivory tower you are referring to is objectivity. Brian Lucey was talking Eamonn Ryan on Newstalk this morning, and made a very telling point regarding the independant advice the Greens received from their economic advisors. The exchange went something along the lines of:

Lucey: Were your independant advisors Irish or foreign, and were they employed in "the market" or outside of it?
Ryan: They were Irish, they were independant, they were "in the market"
Lucey: And when you asked them if you should bail them out, what answer did you expect to get?

Academic economists can say what they like, which is why they are valuable. If Morgan Kelly was employed by AIB or Bank of Ireland he would have been fired years ago. All of the economists "in the market" are bought and paid to dress up positive spin for their employers. Thats their job. And if they forget that they are essentially PR spin, then they get fired. One of the primary issues with the media analysis of economic and financial matters over the past decade is that they have given biased market actors platforms for press release spin dressed up as some sort of independant commentary.

I base my opinion on my own views on the world. What Kelly has said may be true I didn't say it wasn't, I merely said that we should not take it as the word of God because it isn't. It is the opinion, and well informed opinion yes, but still just that.

Put it like this. A record producer who has been in the business for years can work on an album and make something that he is sure will sell. He could hire the best composers, the finest session players and fill the CD with the catchiest hooks and memorable lyrics and spend millions recording it. But, and this has happened many times in reality, the album could be a flop.

Why? Because sometimes things do not pan out as we envisage. Dozens of economists of Morgan Kelly's level did not see the recession coming despite all their skills. Many did and they were right, well done to them but no one alive can know for sure what will happen in the future.

Maybe Morgan Kelly is right but maybe he is wrong. Perhaps what happens will not be as bad as he predicts and perhaps it will be worse. Time will tell.

Your opinion seems to be different to mine and that's perfectly fine, I'm not going to attempt to change your mind because perhaps you are a more intelligent person than me and perhaps you are better informed than me. I just want to state my own view on this.

Flamed Diving

Morgan Kelly is always right.

AARRRRGH

RichardAnd wrote: »

Why? Because sometimes things do not pan out as we envisage. Dozens of economists of Morgan Kelly's level did not see the recession coming despite all their skills. Many did and they were right, well done to them but no one alive can know for sure what will happen in the future.

More true about economists than any other profession on the planet.

Amhran Nua

I had a look at the article there expecting to find a couple of fairly dubious assumptions that he based his thinking on, but to be honest he scores too many solid hits and has too much of an in-depth knowledge of the workings of the Irish government and its interactions with the Irish economy to be so easily dismissed.

Very troubling stuff.

I still wouldn't put money on a run on Irish banks in the markets, basically forcing our guarantee to pay up, but the possiblity is non trivial.

George Orwell 1982

The fact that he has been proven right time and time again means he has to be taken seriously.

His prediction that the country will go bust is not based on worst case scenario assumptions, it is based on a fairly reasonable assessment of the available facts.

No one can say Ireland will definitely go bust or what exactly will happen, but things are not looking good.

rightwingdub

What will unemployment increase to if there is a second financial crisis will it be 650,000-700,000.

If there is a second crisis then the government should let the banks collapse.

jamieh

Hi all,

I know this is probably a really stupid question but nonetheless....

What would the consequences be for most people, if the country did go bust?

Personally, I graduated from a masters last year and am lucky enough to have a job in one of the Big 4 accounting firms. I'm just wondering, how would it effect people like me who are just starting out?

turly

What would the consequences be for [people like me], if the country did go bust?

In a feeble attempt to 'get down with the kids', I will answer your question in txt-speak:

U WL B FCKD

In fact, I would go further and say

WE WL ALL B FCKD.

kuntboy

How many predictions did he get wrong? They'll all be conveniently ignored of course.

Flamed Diving

I love this public perception of 'economist as witchdoctor', gazing into glass spheres.

The reality is that 95% of economists have nothing to do with forecasting, and those that do, spend a very small proportion of their time doing it.

But, I know people don't like to hear this, based on past experience.

oppenheimer1

Deleted User wrote: »

We should have let the banks fail, created new ones and made all the deficit cuts in one go. We would have turned the corner by now

Thats naive to think that. we would have been ruined had the banks went down. We could still end up ruined anyway, but at least we have given ourselves a fighting chance.

oppenheimer1

Sand wrote: »

What part of his argument do you base your refutation on?

Or is the logic:

1 - Morgan Kelly is an economist.
2 - Economists can be wrong.
3 - Ergo, Morgan Kelly is wrong.

Morgan Kelly is not going to pick the winning lotto numbers next week, but hes a proven ability to analyse the available information and highlight the inconvenient truth. Remember the "soft landing" that was peddled a few years back? Now the line is that we have "turned the corner". Saying this wont make it so. Ignoring contrary conclusions drawn in an objective rational manner wont stop them from playing out.

And why should the opinion of academics be taken with a pinch of salt? That ivory tower you are referring to is objectivity. Brian Lucey was talking Eamonn Ryan on Newstalk this morning, and made a very telling point regarding the independant advice the Greens received from their economic advisors. The exchange went something along the lines of:

Lucey: Were your independant advisors Irish or foreign, and were they employed in "the market" or outside of it?
Ryan: They were Irish, they were independant, they were "in the market"
Lucey: And when you asked them if you should bail them out, what answer did you expect to get?

Unemployment is stable and the economy is out of recession, sounds like corner turning to me. But like during the boom few dared to call the end. It seems this daft mindset has come full circle and no one wants to display a bit of hope that the economic storm is over.

SkepticOne

RichardAnd wrote: »

Why? Because sometimes things do not pan out as we envisage. Dozens of economists of Morgan Kelly's level did not see the recession coming despite all their skills. Many did and they were right, well done to them but no one alive can know for sure what will happen in the future.

Maybe Morgan Kelly is right but maybe he is wrong. Perhaps what happens will not be as bad as he predicts and perhaps it will be worse. Time will tell.

You are quite right to say that the fact that he's an economist means very little. I think a way of approaching this is to put aside the fact that he's an economist of any sort.

What matters is what is going to happen to the economy. Have "we turned the corner" as some suggest or are we in a downward spiral? These, I think you will agree, are the important questions.

Now when someone like Morgan Kelly comes along with his opinion, there are some things we need to know:

1. Does he have an agenda? Who does he work for? etc.
2. (more importantly, imo) Does he have a track record of successful predictions? In other words has he been able to use his training as an economist to demonstrate an insight into the Irish economy.

The answer to the second question seems to be that he does indeed have an insight into the economy as demonstrated by previous successful predictions. Then you read what he actually has to say and see if that makes sense which it seems to.

dan_d

I doubt Malcolm O' Kelly has an agenda..he's an economist and they are always a bit pessimistic, let's face it.
Read that article again. He uses a lot of conjecture, makes several assumptions, and then proceeds to tell us that in order to "solve" (or at the very least improve the problem) we need to do what Uruguay did and then tells us how good the new Central Bank Governer and Regulator are.
He's envisioning a lot of problems that have not yet happened, and may never happen.
I am not writing off his analysis. I know we have massive problems. I know things are not good. But as articles go, that particular one does not tell us anything most people don't already know.
One thing that has become blindingly clear in this whole mess is the extremely poor level of journalism in this country.

danbohan

oppenheimer1 wrote: »

Unemployment is stable and the economy is out of recession, sounds like corner turning to me. But like during the boom few dared to call the end. It seems this daft mindset has come full circle and no one wants to display a bit of hope that the economic storm is over.

unemployment is stable ? , thats great ,in a country that exported 60,000 to 100000 of its people in last 18 months, very stable

in the real world , outside the government / public service/ agency spin their is little sigh of an economy coming out of rescission,

nobody believes in pr or spin anymore , we believe in what we see not what we are told , maybe its good we have learned that much !

SkepticOne

dan_d wrote: »

we need to do what Uruguay did and then tells us how good the new Central Bank Governer and Regulator are.

Why is there a contradiction there? I think most people will agree that the current central bank governor and financial regulator are far better than the ones we used to have but they have specific remits. If what Kelly says is true and we're heading towards default then there's not much these regulators can do about it.

OMD

dan_d wrote: »

I doubt Malcolm O' Kelly has an agenda...

Except to play rugby:D

OMD

SkepticOne wrote: »

You are quite right to say that the fact that he's an economist means very little. I think a way of approaching this is to put aside the fact that he's an economist of any sort.

What matters is what is going to happen to the economy. Have "we turned the corner" as some suggest or are we in a downward spiral? These, I think you will agree, are the important questions.

Now when someone like Morgan Kelly comes along with his opinion, there are some things we need to know:

1. Does he have an agenda? Who does he work for? etc.
2. (more importantly, imo) Does he have a track record of successful predictions? In other words has he been able to use his training as an economist to demonstrate an insight into the Irish economy.

The answer to the second question seems to be that he does indeed have an insight into the economy as demonstrated by previous successful predictions. Then you read what he actually has to say and see if that makes sense which it seems to.

Can anyone answer the 2 questions I asked previously.

1. Why does he assume all the losses of the banks have to be covered by the government. He makes no allowance from the banks selling assets, rights issues or profits from other sectors.

2. Why does he feel all this will occur within next 30 months? Doesn't NAMA at least put off the actual losses into the future?

Tora Bora

RATM wrote: »

Ah c'mon, did it matter that he was sitting in an ivory tower when he called the property maket as over heated and doomed and was proven correct?

I think some people are missing the point of this thread- Morgan Kelly said there would probably be a run on the banks .

He was referring to interbank loans but a bank not being able to borrow means there are much deeper effects. If a run happens in the interbank loan market you can be assured the public will panic and attempt to withdraw all their funds, they don't trust much thats coming out of the governments mouth ('We've turned a corner') and people may see the bank guarantee scheme as not worth the paper its written on.

If there's a run on the banks then you can expect mass scale panic- in the markets and in the streets. He seems to be me be predicting a forthcoming Black Friday and I hope for all our sakes he is wrong. But I find it frightening that now we have 2 economists who have predicted another collapse of the financial system- McWilliams did so in the SBP 3 weeks ago. Read into that what you will but both have been broadly correct in their analysis up until now.

Lot's of money flowing into rabodirect.ie over past 2 months!

oppenheimer1

oppenheimer1 wrote: »

Unemployment is stable and the economy is out of recession, sounds like corner turning to me. But like during the boom few dared to call the end. It seems this daft mindset has come full circle and no one wants to display a bit of hope that the economic storm is over.

http://www.insolvencyjournal.ie/home_more_details/10-05-04/Insolvencies_up_by_27_And_Over_Four_Companies_Going_Bust_Per_Day.aspx

Insolvencies have increased by 27 per cent compared to the same period last year. A total of 532 company failures were recorded so far this
year, compared to 419 between January and April 2009.

Hmmmmn

Amhran Nua

OMD wrote: »

1. Why does he assume all the losses of the banks have to be covered by the government. He makes no allowance from the banks selling assets, rights issues or profits from other sectors.

If the markets decide that Irish banks are valueless, who will buy? Most if not all of the assets of Irish banks are their retail mortgage books. He makes the good point that default numbers in those are meaningless at the moment since banks might just reduce payments to something that can be afforded. Its a shell game and its only a matter of time until the markets spot the shell.

OMD wrote: »

2. Why does he feel all this will occur within next 30 months? Doesn't NAMA at least put off the actual losses into the future?

I think he's making the point that thats all NAMA and even the limited deficit cuts are doing. Its a bit of sleight of hand to put off the real problems until FF are out of office, which we're all very much aware of in these parts - his point as far as I can make out is that the markets won't be fooled by it for much longer. Eventually it will come down to unions vs elected government, at which time things will get interesting.

Again, I wouldn't put money on it, the EU is making moves to tighten up control of the markets, but it is a possiblity.

oppenheimer1

oppenheimer1 wrote: »

Thats naive to think that. we would have been ruined had the banks went down. We could still end up ruined anyway, but at least we have given ourselves a fighting chance.

Give who exactly a fighting chance? The banks? The Fianna Fail party? Both would have been destroyed had we taken our medicine in 2008 but just look across at Iceland - they have:

Better growth rates than us now,
Lower unemployment


Every euro spent on the banks is money taken out of the economy and wasted on property speculation. Those euros are taken from peoples pockets that would other wise have been spent in a real economy providing jobs.

We had loads of options other than a blanket guarantee or NAMA. We could of picked banks to save or created new ones, had foreign banks come in. A total collapse would have had the huge benefit of having this whole charade over and done with in a few short months.

Clowns who want to maintain the status quo like Lenihan and Cowen at all costs are what prevents this country from improving in the long run. In my opinion a complete wipeout would have cleaned the slate in the banks and in politics. Suck it up - we would be better off.

ricman

WE should have just supported aib and boi, theres no logical reason to support anglo or the other banks.IN his article he says the amount of dept we are taking on is too much, many of the banks loans are worthless , so at some point irish banks wont be able to borrow money .
And i don,t see this government making deep cuts, ie reduce all civil service pensions to 30k max.The us government is allowing many banks to fail, it helps certain large banks in order to keep the economy running.
IT could close down many quangos that are not needed.

Mister men

We let them do it. We are as much to blame as anyone.

George Orwell 1982

Amhran Nua wrote: »

Eventually it will come down to unions vs elected government, at which time things will get interesting.

It won't be unions versus elected govt. it will be the markets versus the people. Greece had elected a socialist government before the crisis but they still had to introduce the austerity measures that the EU and IMF demanded. It has nothing to do with elected governments or democracy.

It won't just be public servants who will have to take the pain, it will be everyone. As an example, yesterday the Sindo published a story about proposals to charge parents €500 a year for their children to use the school bus. http://www.independent.ie/education/latest-news/price-hike-will-force-thousands-off-school-bus-2191781.html

There is no gaurantee that deficit reduction as a strategy for Europe will work. For Ireland we have no choice to make efforts to reduce the deficit, but as a policy for Europe deficit reduction may not work and the ECB may have to turn to printing money: http://www.guardian.co.uk/commentisfree/2010/may/17/keynes-danger-deficit-reduction

OMD

Amhran Nua wrote: »

If the markets decide that Irish banks are valueless, who will buy? Most if not all of the assets of Irish banks are their retail mortgage books. He makes the good point that default numbers in those are meaningless at the moment since banks might just reduce payments to something that can be afforded. Its a shell game and its only a matter of time until the markets spot the shell.

I am talking about their overseas assets, mainly banks in Poland, UK and USA. Also parts of the banks are generating profits. Also, BoI for example has a rights issue looking to raise 1.7 billion. All of this seems to be ignored in his figures.

Banned Account

An economist is someone who can tell us tomorrow why the prediction he made yesterday didn't come true today. They are as reliable as met eireann.

I do worry about the country though, between malcolm o'kelly lecturing on the economy and a PHD graduate with a big 4 accounting firm not knowing what would happen if the country went bust, we may be in trouble

danbohan

ei.sdraob wrote: »

writes Morgan Kelly...





some more doom and gloom on this beautiful and sunny day today :P

ok folks , scare over , false alarm , all clear has sounded. that great economist Eamon Ryan has said its not a problem at all all !

johnnyskeleton

DoF's response:

http://www.irishtimes.com/newspaper/finance/2010/0524/1224271011035.html

Essentially there is no default risk on the bank bonds because they are guaranteed by the government. No default risk on the part of banks means no risk of government defaulting because of them. QED

As regards comparisons of debt to GNP rather than GDP, this is wrong because GDP measures what we can tax but GNP includes money made by Irish companies earned and taxed abroad. Therefore, logically, GDP is a smaller, more conservative estimate of the real wealth that the government can tax. QEDII.

Link to Eamon Ryan's response, which makes even less sense:

http://www.rte.ie/news/2010/0524/economy.html

Amhran Nua

George Orwell 1982 wrote: »

It won't be unions versus elected govt. it will be the markets versus the people.

Can you remind us again how the people in government got to be in charge of the country. This far left headbangers mantra might fly in places like Greece and Spain where they are well entrenched, but we like a little more realism here on this side of the continent. Or at least we do these days.

OMD wrote: »

I am talking about their overseas assets, mainly banks in Poland, UK and USA. Also parts of the banks are generating profits. Also, BoI for example has a rights issue looking to raise 1.7 billion. All of this seems to be ignored in his figures.

Yes its working for the time being; what he's saying is it won't work for much longer.

Madd Finn

turly wrote: »

In a feeble attempt to 'get down with the kids', I will answer your question in txt-speak:

U WL B FCKD

In fact, I would go further and say

WE WL ALL B FCKD.

FCKD how?
Whaddya mean FCKD?
You mean like in Africa FCKD?

You mean like no food in the shops? No police force? No ambulances? Repossessions of homes? Haiti-like armed gangs patrolling the streets cornering the market in everything from food to petrol to gas cylinders?
Ration coupons for basic foodstuffs?

Or just rampantly more expensive luxury goods because we'll have a junk currency and imported Band and Olufsen TVs, Lexus cars, ski-ing holidays in Austria will be three times more expensive than they are now?

You said it. I don't know what you mean? You're a big boy?

What the FCK is so FCKD about us?

ei.sdraob

johnnyskeleton wrote: »

DoF's response:

http://www.irishtimes.com/newspaper/finance/2010/0524/1224271011035.html

Essentially there is no default risk on the bank bonds because they are guaranteed by the government. No default risk on the part of banks means no risk of government defaulting because of them. QED

As regards comparisons of debt to GNP rather than GDP, this is wrong because GDP measures what we can tax but GNP includes money made by Irish companies earned and taxed abroad. Therefore, logically, GDP is a smaller, more conservative estimate of the real wealth that the government can tax. QEDII.

Link to Eamon Ryan's response, which makes even less sense:

http://www.rte.ie/news/2010/0524/economy.html

rofl @ the Ministry of Plenty response to Mr Kelly

GDP = private consumption + gross investment + government spending + (exports − imports)

I wonder how the department feel about the bolded bit above while raking in debt faster than anyone else

kind of reminds me of people during the bubble who were in debt up to their necks, thinking they were rich...