Where did the money go???

Slideshowbob

OK

So we overpaid for sites and property etc over last few years, but where did the money go?

Is it hoarded in bank accounts?

Interest charged was at low rates!!! so how come we in so much trouble!!!

Someone has the money!!!

Is all this recession a scam?

Please explain!!

wylo

Just because people 'spent' money on big houses doesnt mean they actually gave any money to the banks. They just took out loans.
Correct me if Im wrong here

1/ECB gives cheap credit to anglo,
2/anglo gives credit to Property developer and allows to take out huge loans
3/property developers build a load of houses, pay builders,pay for land, construction , whatever.
4/ They cant sell the houses
5/ Anglo go broke
6/ECB sh1t themselves

So the money is gone in the unsold and half built houses.
The money went to the block layers, electricians, builders who probably blew alot of it.

The_Honeybadger

Where did the money go? Landowners who sold sites have some, auctioneers have some, clever developers and speculators who got out in time have some, but alot of it was spent on wages and materials to build unwanted houses. The workers building the houses spent the wages on houses and cars etc themselves. The rest evaporated into thin air as the assets the money was borrowed for (property) have plummetted in value, which is the main issue, google "glass bottle site" for a prime example of where a couple of hundred million just vanished!

shannonpowerlab

Booze, Cars, Drugs, Junkets, Vanity government projects, vanity foreign investments me thinks.

wylo

not to mention flash foreign holidays

Aka Ishur

Ok. Say I bought a house off you 10 years ago at €100,000. I sold it two years ago at €1m euro. Nothing changed the house but its value.

Now say I bought the house off you two years ago. I borrowed €900000 from the bank to buy it. I want to sell it now but the best i am offered is €100,000. Again nothing changed but it's percieved value.

Thats the simplified cornerstone of the Irish recession. The bank still wants its 9000000. The interest I'm paying is killing me. I stop spending to pay it off, slowng the flow of money into the local economy, spirralling all the way up to job losses.

These job losses go on the dole while also not paying the tax they used to. State starts spending more than it has so has to start borrowing the difference. Banks then find that billions are owed to them with no prospect of repayement. Rumours start and in a grand gesture (assured by the banks that it was a safe bet) the State guarantees all deposits in said banks. Turns out banks lied.

Slideshowbob

Aka Ishur wrote: »

I borrowed €900000 from the bank to buy it.

who got the 900k and what they do with it???

and to previous answers I don't buy it saying 'We wasted it all'

What about the large sites purchased in Dublin, eg Jurys Hotels, Glass Bottle site - where that dosh gone?????

shannonpowerlab

Aka Ishur wrote: »

Ok. Say I bought a house off you 10 years ago at €100,000. I sold it two years ago at €1m euro. Nothing changed the house but its value.

Now say I bought the house off you two years ago. I borrowed €900000 from the bank to buy it. I want to sell it now but the best i am offered is €100,000. Again nothing changed but it's percieved value.

Thats the simplified cornerstone of the Irish recession. The bank still wants its 9000000. The interest I'm paying is killing me. I stop spending to pay it off, slowng the flow of money into the local economy, spirralling all the way up to job losses.

These job losses go on the dole while also not paying the tax they used to. State starts spending more than it has so has to start borrowing the difference. Banks then find that billions are owed to them with no prospect of repayement. Rumours start and in a grand gesture (assured by the banks that it was a safe bet) the State guarantees all deposits in said banks. Turns out banks lied.

Yes. The morons in the banks treated virtual money like real money.

Dotsie~tmp

Most money is never actually in circulation. Most is lines on a banks balance sheet. Those lines can be crossed out as losses if the value of the asset falls or isnt paid back. Unless you convince someone to cover that loss by creating new debt calling it a bailout and they buy it.

wylo

Slideshowbob wrote: »

who got the 900k and what they do with it???

and to previous answers I don't buy it saying 'We wasted it all'

What about the large sites purchased in Dublin, eg Jurys Hotels, Glass Bottle site - where that dosh gone?????

unbuilt and empty unsold houses

Slideshowbob

wylo wrote: »

unbuilt and empty unsold houses

What? you know that for a fact??? Would need more evidence from you than that simplification on that one!!

shannonpowerlab

Slideshowbob wrote: »

What? you know that for a fact??? Would need more evidence from you than that simplification on that one!!

Was it on the news last night?

wylo

Slideshowbob wrote: »

What? you know that for a fact??? Would need more evidence from you than that simplification on that one!!

Ok firstly, WHAT money exaclty, seriously, what money are you talking about? The money the developers had to their name? The money that all the workers who build the houses earned? What money are you referring to ? If you answer that itll be very easy for people to answer the rest of your question.

MazG

Hi OP

Your question was answered here:

http://www.boards.ie/vbulletin/showpost.php?p=68962309&postcount=7

And an excellent answer it was too, in my opinion.

As for the money handed over for the massive high-profile land deals, have a read of this and a possible answer to that question may present itself to you:

http://www.thepost.ie/story/text/ojkfojidoj/

The_Honeybadger

Slideshowbob wrote: »

What? you know that for a fact??? Would need more evidence from you than that simplification on that one!!

Ok here is an example, a developer buys a plot of land from a farmer for 1m euro, which he borrowed from the bank. The farmer goes to lodge the money in the AIB, but is told by their advisor he would be far better off buying shares in AIB as they will provide a much higher return than a deposit account.

Developer builds 100 houses, sells them at a profit to couples who all get mortgages from the same bank as the developer used to purchase the land. He takes his profit and rolls it into the next site, along with more borrowed money.

Many of the couples lose their jobs or get paycuts, they can't pay their mortgages and their houses are now worth 50% of what they paid, not that they could sell them anyway, they are bust and can't pay what they owe. The developer has to abandon his new project midway through as demand for housing has collapsed and he has no chance of recouping what he has invested, he is bust and can't pay what he owes. In turn the bank goes bust due to all these bad loans, share price collapses wiping out the farmers 1m euro in the process. The money has vanished, all that is left is the debt that the developer and mortgage holders owe, and the houses which are now almost worthless. This is totally over simplified, but I think is a reasonable explanation of where we are.

pwd

It went to the banks. All the interest on all those massive loans people were getting.

It also went to building houses and buildings nobody wants any more.

It went to hardworking foreign nationals who were sensible enough to just send their money home where it was worth far more, than to get massive debts. Lots of them have gone home now too, since the work is gone, so all these houses are even more useless. Lots of them were working in the construction industry.

I'd guess that plenty of foreign property developers made a profit on Irish property and got out before the bubble burst too.

smokie2008

https://www.youtube.com/watch?v=a37sRjkLtWw

Slideshowbob

wylo wrote: »

Ok firstly, WHAT money exaclty, seriously, what money are you talking about? The money the developers had to their name? The money that all the workers who build the houses earned? What money are you referring to ? If you answer that itll be very easy for people to answer the rest of your question.

as i stated - the likes of money from Jurys, ballsbridge and glass bottle site.

Say all the money from still undeveloped sites bought between 2004 and 2008.

cast_iron

mickeyk wrote: »

Ok here is an example, a developer buys a plot of land from a farmer for 1m euro, which he borrowed from the bank. The farmer goes to lodge the money in the AIB, but is told by their advisor he would be far better off buying shares in AIB as they will provide a much higher return than a deposit account.

Developer builds 100 houses, sells them at a profit to couples who all get mortgages from the same bank as the developer used to purchase the land. He takes his profit and rolls it into the next site, along with more borrowed money.

Many of the couples lose their jobs or get paycuts, they can't pay their mortgages and their houses are now worth 50% of what they paid, not that they could sell them anyway, they are bust and can't pay what they owe. The developer has to abandon his new project midway through as demand for housing has collapsed and he has no chance of recouping what he has invested, he is bust and can't pay what he owes. In turn the bank goes bust due to all these bad loans, share price collapses wiping out the farmers 1m euro in the process. The money has vanished, all that is left is the debt that the developer and mortgage holders owe, and the houses which are now almost worthless. This is totally over simplified, but I think is a reasonable explanation of where we are.

I think the OP is basically asking where the farmer's €1m is. The simple answer is he may have spent it on cars and holidays and booze, or he may have invested it in shares etc (and most of its value just vanishes as the gamble didn't pay off), or he may have it under his mattress.

as i stated - the likes of money from Jurys, ballsbridge and glass bottle site.

The €400m for the glass bottle site is has not necessarily vanished as a result of the collapse of its current worth. The developers purchased it off the owners: State-owned Dublin Port Company received €138 million and South Wharf received €274 million from the purchase. They got their money just like Tesco gets your money when you buy something off them.

The_Honeybadger

cast_iron wrote: »

I think the OP is basically asking where the farmer's €1m is. The simple answer is he may have spent it on cars and holidays and booze, or he may have invested it in shares etc (and most of its value just vanishes as the gamble didn't pay off), or he may have it under his mattress.
.

I used the example that I did because I personally know a farmer who had a major windfall from selling a site and subsequently was convinced by a bank official to invest it in shares and pretty much lost the lot. The site that he sold now has a ghost estate on it, without a single unit even finished, it has been mothballed for years, before 2008 even. Of course there are also plenty of others who had similar windfalls and were wiser with what they made. There is plenty of money in deposit accounts around the country, but there is unfortunately a far greater sum that has been lent out by the banks that will never be recovered, and the taxpayer will foot the bill as things stand.

Piri

Why the banks are not loosing?

Banks lost 100 bn euro But you have to pay back the loan of IMF what they got:mad:

Other problem is : Paddy has 300k mortgage on his house as a loan from AIB , because of IMF and EU gave 100 bn euro to Ireland and this money goes to AIB, Anglo etc.

Next year Paddy loosing his job as 100 bn euro gone to banks.
Hi will not able to pay back his loan.
In this case AIB will have money from IMF AND house of Paddy as well !!!
It is not fair IMHO

Saila

Piri wrote: »

Why the banks are not loosing?

Banks lost 100 bn euro But you have to pay back the loan of IMF what they got:mad:

Other problem is : Paddy has 300k mortgage on his house as a loan from AIB , because of IMF and EU gave 100 bn euro to Ireland and this money goes to AIB, Anglo etc.

Next year Paddy loosing his job as 100 bn euro gone to banks.
Hi will not able to pay back his loan.
In this case AIB will have money from IMF AND house of Paddy as well !!!
It is not fair IMHO

In simple terms because banks are not 'allowed' to fail with the exception of Anglo Irish Bank probably, that place has single handedly ruined the country. Banks are what makes countries 'civilised' and if the banks go so does civilisation. But you say "oh home come other countries dont get into the same mess Ireland did?" well because they have sufficient regulation and not as much corruption to allow all the regulations which are supposed to protect economies from getting into the situation Ireland now finds itself in. So you say "how did this happen in ireland then?" see the answer to the question before this and figure it out

scr123

Money has no hiding place. Yes there are exceptions but money keeps flowing and government eventually gets its hands on enough of it to achieve equilibrium in the economy.
Somebody using this board posted a link to an excellent piece on money and its history. I watched it but it was way past bedtime and just clicked out when finished. Cannot remember the name of the poster to backtrack but would love to watch the video again when less tired

3DataModem

mickeyk wrote: »

but is told by their advisor he would be far better off buying shares in AIB as they will provide a much higher return than a deposit account..

Yeah but who sold the shares...? Surely they have the 100k now.

Nolanger

Slideshowbob wrote: »

Please explain!!

Explained!

https://www.youtube.com/watch?v=Pu3IT1kGavE