120,000,000,000 at 5% : Can we actually pay it back?

Yitzhak Rabin

So its just been announced that the bailout will likely be 120BN. This is an incomprehensibly large number. I don't think the human brain can actual visualise how large it is. Mine can't anyway.

With just a quick bit of back of the envelope calculations it looks like if we manage to pay that amount back in a 5 year timeframe, then we would also be paying an additional 15BN in interest payments.

Is this right? Is it possible for an economy of 4 million people with an already gigantic debt to service an additionally huge debt? I really can't see it happening without some radical change in our economic outlook. Is today the day we are seeing our country move from being a first world country to a debt ridden banana republic? Tbh, I am really sh*tting it thinking about the trajectory this country is on!

Anita Blow

Where was it officially announced it would be that high?

Yitzhak Rabin

Anita Blow wrote: »

Where was it officially announced it would be that high?

Most of the media are saying it, and more importantly Lenihan is refusing to admit if the figure is that high.

http://www.bloomberg.com/news/2010-11-21/ireland-set-to-receive-120-billion-euro-rescue-fund-times-says.html

gizmo

yekahs wrote: »

Most of the media are saying it, and more importantly Lenihan is refusing to admit if the figure is that high.

http://www.bloomberg.com/news/2010-11-21/ireland-set-to-receive-120-billion-euro-rescue-fund-times-says.html

He refused to admit the number was as high as €70-80b, not sure where €120b came from.

He confirmed that the amount of money involved amounted to 'tens of billions' of euros but denied suggestions it would be as much as €70 or €80 billion.

Link

wylo

tbf the media has been right about the past 2 weeks so I doubt they'd be publishing that lightly.

Naikon

I just hope the figure isn't even higher, and knowing FF, it's not out of the question. The cvnts lied to us up to the last second after all. Imagine if the IMF uncover just the tip of the iceberg. Mismanagement of a country for 15+ years does not come without consequences.

Anita Blow

yekahs wrote: »

Most of the media are saying it, and more importantly Lenihan is refusing to admit if the figure is that high.

http://www.bloomberg.com/news/2010-11-21/ireland-set-to-receive-120-billion-euro-rescue-fund-times-says.html

But the only source quoted there is another newspaper which it says had nothing to back up the claims.
The government may be lying, but not even the EU or IMF have come out yet with a figure like that

DiscoStu

He has stated that it's likely to be a drawn down fund. We will have x amount on tap for when the **** truly hits the fan but wont accrue interest until we actually avail of it. A national credit card if you like.

It's the best possible outcome given the inevitability of the "bailout".

Fluffybums

Even at 80bn that represents a debt to every single person in the republic of around 18000. And that is just for this current debt and does not included that previously built up. The 40bn for anglo is another 9,000 each.

Quite frankly at this stage, 80 or 120 doesn't really make much difference the individual debt per person (and I'm not talking about working or potential working population) is almost unsustainable.

Yitzhak Rabin

DiscoStu wrote: »

He has stated that it's likely to be a drawn down fund. We will have x amount on tap for when the **** truly hits the fan but wont accrue interest until we actually avail of it. A national credit card if you like.

It's the best possible outcome given the inevitability of the "bailout".

I'm skeptical about this "draw down fund". I can't believe that an organisation like the IMF could just set aside that amount of money for a country, but not charge interest on it. By the very act of setting it aside, they might as well have lost the money for the period they can't use it. I presume there will be interest to pay on it, even if its only a small rate?

kirb42

Just checked out the Fianna Fail web site.... not a mention of this. hear no evil see no evil... comic brilliance.......

Yitzhak Rabin

gizmo wrote: »

He refused to admit the number was as high as €70-80b, not sure where €120b came from.

The media has been correct about pretty much everything in the last week. On the other hand, the government has lied about pretty much everything in the last week month two years.

PeakOutput

yekahs wrote: »

I'm skeptical about this "draw down fund". I can't believe that an organisation like the IMF could just set aside that amount of money for a country, but not charge interest on it. By the very act of setting it aside, they might as well have lost the money for the period they can't use it. I presume there will be interest to pay on it, even if its only a small rate?

of course they can while 'setting it aside' might be a simplistic way of putting it whereever the money is before it is drawn down(transfered into irish goverment accounts) it will be earning interest for the imf as it is intheir bank accounts

SkepticOne

Going on what Morgan Kelly (who has been fairly right on these issues), no, we won't be paying all of that back. Most of it will be going into the black hole of the banks anyway. It is simply extra debt for the tax payer that we're taking on in order to maintain stability of the European banking system and integrity of the single currency.

Monty Burnz

yekahs wrote: »

The media has been correct about pretty much everything in the last week. On the other hand, the government has lied about pretty much everything in the last week month EIGHT years.

Fixed that for you.

WalterMitty

Fianna Fail are borrowing 30,000 euro for every man woman and child in order to keep them and their public sector friends on higest public sector pay in world whilst also cutting min wage ,welfare , childrens allowance and cutting services. Obscene self serving actions

Yitzhak Rabin

PeakOutput wrote: »

of course they can while 'setting it aside' might be a simplistic way of putting it whereever the money is before it is drawn down(transfered into irish goverment accounts) it will be earning interest for the imf as it is intheir bank accounts

It'll still be at a cost to them though.

They could a) set it aside in, lets say, German 5 year bonds at an interest of 3-4% interest, or b) set it aside in 'their bank accounts' at a lower interest rate of
2%.

So, by maintaining quick access to the money, they earn less, thats why I think it will be me and you making up the difference.

DiscoStu

yekahs wrote: »

I'm skeptical about this "draw down fund". I can't believe that an organisation like the IMF could just set aside that amount of money for a country, but not charge interest on it. By the very act of setting it aside, they might as well have lost the money for the period they can't use it. I presume there will be interest to pay on it, even if its only a small rate?

Pray it's one of the advantages of being the poster boy of IMF styled fiscal austerity internal deflationary policy. I would imagine a lot of this will be coming from the ECB anyway. It would be a perfect opportunity to print another couple of hundred billion and take some of the edge off the euro's value and help european exports while appearing to stabilise the medium term future of the eurozone.

gizmo

yekahs wrote: »

The media has been correct about pretty much everything in the last week. On the other hand, the government has lied about pretty much everything in the last week month two years.

The source was the Sunday Times which also made a point of saying the British taxpayer would be a large contributor to the fund and corporation tax would rise to 15%. Neither of those points inspire much confidence in their reporting, nevermind the fact that their sources were not even alluded to.

As for the figure, given that he denies it will be above the €70/80b mark, I highly doubt it will then leap to €120b.

Dannyboy83

yekahs wrote: »

So its just been announced that the bailout will likely be 120BN. This is an incomprehensibly large number. I don't think the human brain can actual visualise how large it is. Mine can't anyway.

With just a quick bit of back of the envelope calculations it looks like if we manage to pay that amount back in a 5 year timeframe, then we would also be paying an additional 15BN in interest payments.

Is this right? Is it possible for an economy of 4 million people with an already gigantic debt to service an additionally huge debt? I really can't see it happening without some radical change in our economic outlook. Is today the day we are seeing our country move from being a first world country to a debt ridden banana republic? Tbh, I am really sh*tting it thinking about the trajectory this country is on!

I worked out the figures recently, when I assumed it would be an €80bln bailout. (i.e. 2/3rds of that figure) + 92 billion sovereign debt.
So now its 120billion + 92 billion sovereign debt, €212billion

http://www.boards.ie/vbulletin/showpost.php?p=69108091&postcount=25
David McWilliams estimated that the cost of a €50 billion bank bailout was €12k per head on a total headcount of 4.5 million.

But our total debt is soon to be approaching nearly 4 times this figure (€175 billion). i.e. approx €48,000 per head on a falling headcount (emigration is currently the highest in the EU)

So from a working population of 1.8 million people, there are only 1 million who actually contribute tax.
The reason for that is because those 1 million people are sufficiently qualified to earn enough money that they are actually liable.

So now its €175billion across a 1million headcount!!!!!
I can't even really begin to calculate the real figures, but it must €48k x 4, because a working person will be paying their share and the share of the other 3 people not contributing.
So that would mean around €200k per working person who actually contributes on this island.

And then they are the same group of people who must also fund the public services and the social welfare bill.

So the question is, if you sufficiently qualified to actually pay tax in Ireland - WHY THE HELL WOULD YOU STICK AROUND HERE?

Imagine if half of those taxpayers emigrate (the bottom half since wages are not evenly distributed), so now you've only 500k people inside the tax net, meaning the liability on them has doubled to €400k per head!!

And the public expenditure is not going to fall of it's own accord as we offer among the most lucrative social welfare/public sector wages and pensions in the world.

There are some serious changes on the way in Ireland.
Gonna be bringing at least 50% of the 800k outside the net back inside it.
And some exxxtreme choppaging to commencify!

TBH, the figures are so ridiculously large now that we need to either
A) Find a Saudi Oil field under Connaught
or
Find an industrial method to double our income while smashing gov exp.
or
C) Leave the euro and default

My money is on C.

Yitzhak Rabin

gizmo wrote: »

The source was the Sunday Times which also made a point of saying the British taxpayer would be a large contributor to the fund and corporation tax would rise to 15%. Neither of those points inspire much confidence in their reporting, nevermind the fact that their sources were not even alluded to.

As for the figure, given that he denies it will be above the €70/80b mark, I highly doubt it will then leap to €120b.

Just like the fact that he said the cost of Anglo would be no more than 23bn, highly unlikely that that figure would jump significantly, yeah?

WalterMitty

Dannyboy83 wrote: »

I worked out the figures recently, when I assumed it would be an €80bln bailout. (i.e. 2/3rds of that figure) + 92 billion sovereign debt.
So now its 120billion + 92 billion sovereign debt, €212billion



TBH, the figures are so ridiculously large now that we need to either
A) Find a Saudi Oil field under Connaught
or
Find an industrial method to double our income while smashing gov exp.
or
C) Leave the euro and default

My money is on C.

increase population through mass immigration , fills up empty houses, reduces debt per capita! Maybe allow any indian/chinese person with a phd come and live and work here and be given permanent residency.

gizmo

yekahs wrote: »

Just like the fact that he said the cost of Anglo would be no more than 23bn, highly unlikely that that figure would jump significantly, yeah?

Two completely different circumstances, one was not yet finalised on top of the fact that it's reliability was and probably still is, under question while the other has already been agreed upon.

PeakOutput

yekahs wrote: »

It'll still be at a cost to them though.

They could a) set it aside in, lets say, German 5 year bonds at an interest of 3-4% interest, or b) set it aside in 'their bank accounts' at a lower interest rate of
2%.

So, by maintaining quick access to the money, they earn less, thats why I think it will be me and you making up the difference.

you think people with that much money only earn interest rates of 2%? if you have a couple of million sure you can work out special interest rates with banks not to mind billions

also even if that was the case its not at a loss, thats what it is getting right now wereever the money is and guess what while it is there it is under no risk of being given to a goverment that might still go bust and its lost forever.

it is perfectly reasonable to expect that this will be drawn down in incremements with interest being paid only on what has been drawn down

now weather or not that is the actual deal i have no idea im just saying it is possible and is reasonable to expect

strathspey

yekahs wrote: »

I'm skeptical about this "draw down fund". I can't believe that an organisation like the IMF could just set aside that amount of money for a country, but not charge interest on it. By the very act of setting it aside, they might as well have lost the money for the period they can't use it. I presume there will be interest to pay on it, even if its only a small rate?

And not to mention all the conditions attached. Steep tax rises. State assets will be sold off. PS numbers and wages will be chopped. Every 3 months, milestones towards structural reform must be met, otherwise the next tranche of money won't be forthcoming. Remember the IMF is only interested in balancing the books, economic growth doesn't feature too highly on their agenda.

PeakOutput

strathspey wrote: »

Remember the IMF is only interested in balancing the books, economic growth doesn't feature too highly on their agenda.

yet more crap they are interested in balancing the books in the short term

in the long term they have to hope for economic growth(and large growth) if we are to have any chance of paying back the debt to them which they do after all want. they want to the interest to build up but if we cant pay back the debt we still go bankrupt and they lose it all, economic growth is of course part of their plan

Yitzhak Rabin

gizmo wrote: »

Two completely different circumstances, one was not yet finalised on top of the fact that it's reliability was and probably still is, under question while the other is and has already been agreed upon.

How about whether or not they were engaged in bailout talks? Thats a situation that was actually happening... the government still denied that... even though they knew it would prove to be false.

This government has absolutely no qualms in lying to the population. I don't trust them. Basically I trust the media more than government press releases.

Anyway, all I want to try and figure out is, if we do borrow such a huge sum, could we pay it back?

flutered

one has to assume the most popular ditty amoungst the dff is < tell me lies, tell me lies, tell me sweet little lies>.

seadnamac

Threads like this shoulds be deleted immediately. The thread title is wrong and just serves to spread more confusion.

gizmo

yekahs wrote: »

How about whether or not they were engaged in bailout talks? Thats a situation that was actually happening... the government still denied that... even though they knew it would prove to be false.

That seems to have been a combination of a horrific mincing of words and what appears to be a complete lack of communication within the party. I don't think it was so much that the government as an entity lied, I simply think senior figures weren't briefed by those above them. Further proof, if any more was needed of course, that Cowen needs to be removed from not only his current position as Taoiseach, but as the leader of his own party.

yekahs wrote: »

Anyway, all I want to try and figure out is, if we do borrow such a huge sum, could we pay it back?

Yes, but it will depend on economic growth being sustainable over the next number of years. Which is, of course, why the government are so adamant that corporation tax will not be touched. If that is changed then our ability to pay will be severely compromised.

johnnyskeleton

We're already servicing c. 90bn, so its not too much of a stretch.

The real issue is what this figure represents - how much is to renew/buy off old debt, how much is budgetary deficit spending, and how much is going directly to the banks?

thetonynator

Dannyboy83 wrote: »

I worked out the figures recently, when I assumed it would be an €80bln bailout. (i.e. 2/3rds of that figure) + 92 billion sovereign debt.
So now its 120billion + 92 billion sovereign debt, €212billion



TBH, the figures are so ridiculously large now that we need to either
A) Find a Saudi Oil field under Connaught
or
Find an industrial method to double our income while smashing gov exp.
or
C) Leave the euro and default

My money is on C.

Don't worry i'm going to anounce to the world tomorrow that the worlds largest oil reserve is underneath my back garden. Our problems are solved!!!


:pac:

If only . . .:rolleyes:

_Kaiser_

Breaking News has it at €70bn?

I suppose we'll find out for sure over breakfast tomorrow...

Tefral

This is what One Billion looks like if it were to be made of €100 Notes

thetonynator

We're going to need a really big warehouse until we spend it all . . .:P

Bob_Latchford

or a very big black hole to dump it in

thetonynator

Bob_Latchford wrote: »

or a very big black hole to dump it in

Luckily we've got one of those . . .:

..................

wylo

thetonynator wrote: »

Luckily we've got one of those . . .:

..................

i think thats what he was getting at;)

randylonghorn

yekahs wrote: »

I'm skeptical about this "draw down fund". I can't believe that an organisation like the IMF could just set aside that amount of money for a country, but not charge interest on it. By the very act of setting it aside ...

I would assume that it more represents a commitment by a number of IMF member countries to provide a certain percentage of the figure if / when called upon. That doesn't necessarily tie the money down in the meantime.

While interest will obviously have to be paid on any money provided up front, the overall format sounds like an agreement for a massive national overdraft. And you don't pay interest on your agreed overdraft limit, just on what you actually overdraw.

Also, is there a possibility that some of the money may be used to re-pay existing debt, and substitute it with debt which is at least at a lower rate of interest?

Dannyboy83

randylonghorn wrote: »

Also, is there a possibility that some of the money may be used to re-pay existing debt, and substitute it with debt which is at least at a lower rate of interest?

Yes, that's the 'plan'.

In reality, this is just the first in a series of bailouts or before we leave the Euro and default.

Reason for that is because we need to cut 7.5 to 10 billion off the public sector wage bill over the next 4 years.

Given that the public sector have been the best paid group on the island for a number of years, they have a large percentage of the 800,000 mortgages.
Meaning when their pay is reformed, they will have the largest percentage of defaults.

So our sovereign debt is 92 billion now.
And we are borrowing 120billion, to 'refinance'.
But more probably, we are borrowing 120 + 92, because of what is coming.


I imagine the social upheaval in Ireland is going to be a case study for years to come.
I've been renting for 7 years now and there seems to be no bigger group of property owners than the Gardai. AFAIK, it's illegal for a guard to be in negative equity. I reckon most of the force will be in negative equity for the next decade tho.

randylonghorn

Dannyboy83 wrote: »

AFAIK, it's illegal for a guard to be in negative equity. I reckon most of the force will be in negative equity for the next decade tho.

Why would it be illegal for a guard to be in negative equity?

There might be some rules about defaulting on debt all right, for all I know ... there would at least be some logic to that.

I can't see why simply being in negative equity would create any kind of ethical or moral problem though.

thebaldsoprano

Not that it means anything, but from this article:

Mr Lenihan said the total would "not be three figures".

thebaldsoprano

thebaldsoprano wrote: »

Not that it means anything, but from this article:

So only about 99 euro?

thebaldsoprano

Deleted User wrote: »

So only about 99 euro?

Nope, that'd mean the Government wasn't lying, when's the last time that happened?

Dannyboy83

randylonghorn wrote: »

Why would it be illegal for a guard to be in negative equity?

There might be some rules about defaulting on debt all right, for all I know ... there would at least be some logic to that.

I can't see why simply being in negative equity would create any kind of ethical or moral problem though.

I believe it's because they are far more prone to corruption in such instances [my last 3 visits to Lithuania have confirmed the theory]
(might be part of the reason why they've rolled out the rip off speed cameras btw)

http://www.argus.ie/breaking-news/national-news/struggling-gardai-wont-be-fired-2155817.html

randylonghorn

Actually, that article makes it very clear that simply being in negative equity isn't considered a problem.

One can be in negative equity and still be able to service one's mortgage / avoid defaulting on debt, in which case there is no extra incentive at all to corruption.

In fact, the article says that even finding oneself struggling with mortgage repayments / debt isn't grounds for disciplinary action, especially in the current climate.

""What we are talking about there (in the Garda code) is people wilfully incurring debt in the full knowledge they are doing it dishonestly - not in terms of a recession when people unfortunately face circumstances where they can't pay their mortgages." - Fachtna Murphy (Commissioner)

Dannyboy83

randylonghorn wrote: »

Actually, that article makes it very clear that simply being in negative equity isn't considered a problem.

One can be in negative equity and still be able to service one's mortgage / avoid defaulting on debt, in which case there is no extra incentive at all to corruption.

In fact, the article says that even finding oneself struggling with mortgage repayments / debt isn't grounds for disciplinary action, especially in the current climate.

""What we are talking about there (in the Garda code) is people wilfully incurring debt in the full knowledge they are doing it dishonestly - not in terms of a recession when people unfortunately face circumstances where they can't pay their mortgages." - Fachtna Murphy (Commissioner)

Yes, but now you've missed the point I was making in post #40
Post public sector wage reform - they will be insolvent.
That's where the problem lies.

As regard the law concerning negative equity, I believe it is still illegal/not been repealed, but simply being overlooked given the a) magnitude b) circumstances

z0oT

thetonynator wrote: »

Luckily we've got one of those . . .:

..................

Also known as Schrodinger's Bank - one of the few banks to be simultaneously alive and dead.
http://bocktherobber.com/2010/09/schrodingers-bank

randylonghorn

Dannyboy83 wrote: »

Yes, but now you've missed the point I was making in post #40
Post public sector wage reform - they will be insolvent.
That's where the problem lies.

As regard the law concerning negative equity, I believe it is still illegal/not been repealed, but simply being overlooked given the a) magnitude b) circumstances

I didn't miss it at all.

I would however like to see a citation for the element in the law (or even in the Garda Code) which says that being in negative equity (which simply means that you paid or are paying more for your house than it's currently worth) is problematic before continuing this tangential discussion any further.

pavb2

So if the bailout is 80B euro is it being drawn down straight away and what exactly will it be used for?

MagicMarker

Sky News saying the bailout will be less than 100b.