Reap what you saw

shannonpowerlab

I just felt compelled to comment about the current national banking crisis from the group of people who pretty much got nothing out of the boom..and I would like to make this statement.

This whole situation is turning into a true comedy of darkest nature.

Since after the WW2, Germans and French rebuilt their economy and massive industries from rubble and dust.
They have accumulated sizeable amount of cash through genuine value add trades.

Since this country joined EU currency zone, bankers, politicians and developpers kept putting their hands into German and French pockets spending their money to 4 corners calling it EU investments...the funny thing is that of all the people Germans believed those Irish bankers on their investment return...

It even gets better by people buying German high value items using money originating form them since the amount of trading that goes on in this country is nothing in comparison - (the grouth was only artificial) as there was nothing brought in from outside.

It is obvious that they want to have their money back form this national Ponzi scheme..and they will get their money back and they know how.

I would like to appeal to all the people in power or to be in power...

Please do not make things worse than it is now. It is game over.
The struggle will only make the suffering worse.

Hand the money back and bring Punt back to start over again and hope that the next generation will not make the same mistake...

zig

shannonpowerlab wrote: »

I just felt compelled to comment about the current national banking crisis from the group of people who pretty much got nothing out of the boom..and I would like to make this statement.

This whole situation is turning into a true comedy of darkest nature.

Since after the WW2, Germans and French rebuilt their economy and massive industries from rubble and dust.
They have accumulated sizeable amount of cash through genuine value add trades.

Since this country joined EU currency zone, bankers, politicians and developpers kept putting their hands into German and French pockets spending their money to 4 corners calling it EU investments...the funny thing is that of all the people Germans believed those Irish bankers on their investment return...

It even gets better by people buying German high value items using money originating form them since the amount of trading that goes on in this country is nothing in comparison - (the grouth was only artificial) as there was nothing brought in from outside.

It is obvious that they want to have their money back form this national Ponzi scheme..and they will get their money back and they know how.

I would like to appeal to all the people in power or to be in power...

Please do not make things worse than it is now. It is game over.
The struggle will only make the suffering worse.

Hand the money back and bring Punt back to start over again and hope that the next generation will not make the same mistake...

I agree, but you do realise you're suggesting a budget deficit of 20 billion this year alone, not to mention massive uncertainty regarding deposits in the bank.

shannonpowerlab

I know. But what differnece would that make at this point...

Even in a heavily industrialised country after a bust it takes 10 years or so to re-stabilize...EU wants their money back in 4 years with over 5% interest on it.

Only option the Government will have is to tax the heck out of tax payers. Naturally enough, there will be less tax payers here in this country after that.

so if they go for growth option they will never pay it back and if they go for tax option thye also will never pay it off.

Doomed either way.

Longer you hold the fart louder it will be. Should have let it go much earlier.

I say fart away and wait until the smell is gone. Thek think about what to do.

Scofflaw

shannonpowerlab wrote: »

I know. But what differnece would that make at this point...

Even in a heavily industrialised country after a bust it takes 10 years or so to re-stabilize...EU wants their money back in 4 years with over 5% interest on it.

Only option the Government will have is to tax the heck out of tax payers. Naturally enough, there will be less tax payers here in this country after that.

so if they go for growth option they will never pay it back and if they go for tax option thye also will never pay it off.

Doomed either way.

Longer you hold the fart louder it will be. Should have let it go much earlier.

I say fart away and wait until the smell is gone. Thek think about what to do.

The EU/IMF programme is for five years, but that's not the duration of the loans we can draw down - that facility is there for nine years. As to the difference it would make if we can't borrow the money to fund the deficit (and that's what the bailout fund mostly consists of) - the answer is that state spending would have to be cut all at once, and the coming Budget would have contain €20bn of cuts rather than €6bn. Analysts are already concerned at the damage €6bn of cuts will do - €20bn of cuts would send the economy into freefall.

I don't think you're getting a single very vital point here. If we default, we cannot borrow. If we cannot borrow, the State cannot pay social welfare, pensions, CS salaries, or anything else except with the money it has on hand, for probably the next decade. If we don't default, but don't take the bailout, we can only borrow from the money markets, and the money markets are currently pricing Irish debt at 9.5%.

The EU countries are not "getting their money back" - they're lending us yet more money, with a decent risk that we'll default, because nobody else will lend to us. They will fund that money by borrowing from the markets (largely Asian investors) on our behalf, and guaranteeing it with their taxpayers' money, on our behalf, because nobody trusts us very much - and looking at your post, one can see why.

slight regards,
Scofflaw

nice1franko

Scofflaw wrote: »

slight regards,
Scofflaw

:pac:

shannonpowerlab

Scofflaw wrote: »

The EU/IMF programme is for five years, but that's not the duration of the loans we can draw down - that facility is there for nine years. As to the difference it would make if we can't borrow the money to fund the deficit (and that's what the bailout fund mostly consists of) - the answer is that state spending would have to be cut all at once, and the coming Budget would have contain €20bn of cuts rather than €6bn. Analysts are already concerned at the damage €6bn of cuts will do - €20bn of cuts would send the economy into freefall.

I don't think you're getting a single very vital point here. If we default, we cannot borrow. If we cannot borrow, the State cannot pay social welfare, pensions, CS salaries, or anything else except with the money it has on hand, for probably the next decade. If we don't default, but don't take the bailout, we can only borrow from the money markets, and the money markets are currently pricing Irish debt at 9.5%.

The EU countries are not "getting their money back" - they're lending us yet more money, with a decent risk that we'll default, because nobody else will lend to us. They will fund that money by borrowing from the markets (largely Asian investors) on our behalf, and guaranteeing it with their taxpayers' money, on our behalf, because nobody trusts us very much - and looking at your post, one can see why.

slight regards,
Scofflaw

I get your point. But investors will not part with their money unless there is a clear advantage - to gain at the end of it. From what I gather from you it sounds to me as if they are lending as some sort of kindness but I believe otherwise. Where did all the taxpayers money go by the way?
I have a different view point as I am a leftover from foreign investment that came to this country nearly 20 years ago.

brace yourselves!!!

johnnyskeleton

shannonpowerlab wrote: »

Hand the money back and bring Punt back to start over again and hope that the next generation will not make the same mistake...

What are you suggesting? That we leave the euro and all debts are simply forgiven and we return to a magical pre 97 Ireland where everything is good again? You can't do jingle mail with an entire currency.

BeeDI

Yesterday I had the misfortune to have to listen to a tirade from a french man, about the injustice of his countries tax payers having to fork out their money, to bail out feckless countries like Greece and Ireland.
I wasn't long reminding him, that many good young Irish men died in France, and are buried there, trying to liberate the French from under the heels of Hitler. I also took the opportunity to remind him, that his country men, didn't have the best of reputations in the area of standing up to the Germans:cool: http://www.youtube.com/watch?v=ntt3wy-L8Ok&feature=related

Scofflaw

shannonpowerlab wrote: »

I get your point. But investors will not part with their money unless there is a clear advantage - to gain at the end of it. From what I gather from you it sounds to me as if they are lending as some sort of kindness but I believe otherwise. Where did all the taxpayers money go by the way?
I have a different view point as I am a leftover from foreign investment that came to this country nearly 20 years ago.

brace yourselves!!!

The investors who contribute to the EFSF fund will be charging a rate that compensates them for risk. The risk involved is lower than directly lending to Ireland, because their funds are being guaranteed by the other eurozone countries, but higher than the IMF's risk because the EFSF isn't a "preferred creditor", which the IMF is.

As to why - the answer is that we're part of the euro, and part of the EU. So by bailing us out they're doing us and them a favour - luckily for us, since we get a better deal that way. As to who is being done the bigger favour - basically us, because we do have to borrow the money anyway.

cordially,
Scofflaw

sarumite

shannonpowerlab wrote: »

I get your point. But investors will not part with their money unless there is a clear advantage - to gain at the end of it. From what I gather from you it sounds to me as if they are lending as some sort of kindness but I believe otherwise. Where did all the taxpayers money go by the way?
I have a different view point as I am a leftover from foreign investment that came to this country nearly 20 years ago.

brace yourselves!!!

Unfortunately that money was simply debt.

zig

Scofflaw wrote: »

I don't think you're getting a single very vital point here. If we default, we cannot borrow. If we cannot borrow, the State cannot pay social welfare, pensions, CS salaries, or anything else except with the money it has on hand, for probably the next decade. If we don't default, but don't take the bailout, we can only borrow from the money markets, and the money markets are currently pricing Irish debt at 9.5%.

Can I just make the point that its BECAUSE of this European debt that the markets are at such a high interest rate. Now I know its too late now , Im not saying the interest rate would drop if if we didnt pay the ECB debt because we are where we are. But I still just thought this was worth mentioning because you often seem to paint a very rosy picture of the Europeans taking money from their tax payer to help the poor old Irish people on the dole.

shannonpowerlab

sarumite wrote: »

Unfortunately that money was simply debt.

Oh yes totally.

It never belonged here from day 1.

All a debt.

Every penny of it.:pac:

shannonpowerlab

johnnyskeleton wrote: »

What are you suggesting? That we leave the euro and all debts are simply forgiven and we return to a magical pre 97 Ireland where everything is good again? You can't do jingle mail with an entire currency.

No. Live in poverty for the next 30 years.

Scofflaw

zig wrote: »

Can I just make the point that its BECAUSE of this European debt that the markets are at such a high interest rate. Now I know its too late now , Im not saying the interest rate would drop if if we didnt pay the ECB debt because we are where we are. But I still just thought this was worth mentioning because you often seem to paint a very rosy picture of the Europeans taking money from their tax payer to help the poor old Irish people on the dole.

Perhaps I should point out that I haven't claimed we're being given the bailout out of pure love for Ireland - the timing by itself rules that out, as does the list of bailout donors. Those who are offering us a bailout facility are those with a vested interest in our continuing to have a first-world economy. Sure, there's some goodwill in there, but mostly self-interest - that's a good part of being in the EU and the euro, from our perspective, that it gives much larger economies an interest in our well-being. It's still backed by their taxpayers, either way.

I presume the claim you're making is that the fact that the Irish government took on the debts of the Irish banks, who, being unable to access the open markets, were and are reliant on ECB funding to refinance their debts and keep trading.

If so, I can't really see how that gets described as "European debt" - Europe didn't make us take on the banks' liabilities, we'd have done it anyway, except using the Irish Central Bank rather than the ECB, just as we bailed out ICI (an AIB subsidiary) when it collapsed in 1984. The fact that the banks were able to access ECB money to roll over their debts meant that the state taking on the banks' debts, as opposed to letting them fail, wasn't the completely hopeless gamble it otherwise would have been, given that while the Irish banks are much bigger than the state's finances, they're not bigger than the ECB.

Nor were we required to guarantee all the banks' debts in the way we have - indeed, that's been criticised by the ECB.

So, while the place the Irish banks (and through them, the State, to the degree that it has chosen to do so) owe most of their money to at the moment is the ECB, that's largely because the ECB started buying Irish bank debts when it became clear that nobody else would do so, that Ireland could not afford to do so, and that if they collapsed, they'd take the Irish economy and a good chunk of other EU countries' economies with them. The alternative to the ECB buying their debt would have been that collapse, which is something that only looks like a nice place from somewhere else.

It's also worth pointing out that while we tend to concentrate on Irish bank liabilities and get a scary sensation, we're ignoring the fact that the Irish state-owned banks also have assets. Their problems initially related to the value of the property assets they held, and the extent to which they had the capital to back their loans if those property assets were worth a good deal less than the value written in the banks' balance sheets. Those property assets were what NAMA has been dealing with, and the reason the government has been pouring money into the banks in exchange for shares is to make sure the banks have been adequately capitalised after those assets were transferred to NAMA.

For example, at end 2009, AIB had liabilities of €81bn, and post-NAMA assets of €85.2bn. It's not simply a case of if AIB blows, we wind up paying the whole €81bn through the guarantee - instead, we pay the balance, which theoretically leaves us with cash in hand. Those assets do include the money already put in by the state, so the picture is certainly dismal enough - but not actually apocalyptic. However, we don't want to have to wind up AIB, because it handles 35% of all transactions in the country, and shutting its doors would cause that much of the Irish economy to freeze solid for a while. At the moment, though, AIB can't really operate as a normal bank, because nobody bar the ECB will roll over its debts when they fall due, and AIB can't pay them out of capital without decreasing its capital reserve to the point where it has to cease trading. So, two things are happening - first, the balance sheets of the banks are being shrunk towards a scale where the Irish state can look after them - AIB down to €81bn/€85bn liabilities/assets at end 2009 from €97.2bn/€101.3bn at end 2008 - and they're being recapitalised to a point where they could afford to pay at least some of their shrunken debts without breaking their capital limits, at which point, hopefully, they won't have to, which is normality for a bank. In the meantime, though, the ECB is keeping the ball in the air by buying Irish bank debt (at low rates) in order to buy Ireland sufficient time to scale the banks down (and their capital up) to a point where they re-enter the zone of normality.

TL;DR - Irish banks are on ECB life-support while the state tries to pare them down to a size it can manage alone. Without that life support mechanism, the banks collapse, the state guarantee gets called in, and the whole ball of string unravels too early, leaving us holding the bill and minus one or more of our working banks. The ECB could absorb the losses if it all unravels, we couldn't, given the state of our government deficit. They'd rather not get a rope burn from letting go of their end of the rope, and we'd rather not fall down the cliff.

cordially,
Scofflaw

View

Scofflaw wrote: »

... and we'd rather not fall down the cliff.

There appears to be a large contingent of the public who have a death wish and would probably be happy to jump off the cliff, never mind fall down it.

gollem_1975

shannonpowerlab wrote: »

Only option the Government will have is to tax the heck out of tax payers.

they can (and should) reduce our running costs too.

swampgas

View wrote: »

There appears to be a large contingent of the public who have a death wish and would probably be happy to jump off the cliff, never mind fall down it.

Egged on by most of the media and many here as well ...

keithclancy

View wrote: »

There appears to be a large contingent of the public who have a death wish and would probably be happy to jump off the cliff, never mind fall down it.

Sure Brians on his Computer now playing "Run the Country 2.1"

shannonpowerlab

gollem_1975 wrote: »

they can (and should) reduce our running costs too.

Yes they can...if they can identify the correct thing to cut...Only IF.

Looks to me like the current government is playing a game of jenga after a game of Quarters...

Can they find the right one to pull???

Is it this one? or that one?

gollem_1975

shannonpowerlab wrote: »

Yes they can...if they can identify the correct thing to cut...Only IF.

Looks to me like the current government is playing a game of jenga after a game of Quarters...

Can they find the right one to pull???

Is it this one? or that one?

I refer you to the "IMF Name their price" thread.

bcalchess

Scofflaw wrote: »

I don't think you're getting a single very vital point here. If we default, we cannot borrow. If we cannot borrow, the State cannot pay social welfare, pensions, CS salaries, or anything else except with the money it has on hand, for probably the next decade. If we don't default, but don't take the bailout, we can only borrow from the money markets, and the money markets are currently pricing Irish debt at 9.5%.


slight regards,
Scofflaw

Surely it would be better to borrow a smaller amount at 9.5% than a crippling amount at 5.7%. I am not advocating a sovereign default, but as vital information was held back by the banks at the time of the banking guarantee we are within our rights to renege on the guarantee and let the senior bondholders to feel some pain.
With the bank debt off the books Ireland is still in a pretty poor position with regard to its budget deficit but not in the mire that it is in now. The markets have not responded well to the "Bailout" as they can see that there will now be no chance of recovery for Ireland in the short or medium term.

Regards
Beirnie

gollem_1975

bcalchess wrote: »

Surely it would be better to borrow a smaller amount at 9.5% than a crippling amount at 5.7%. I am not advocating a sovereign default, but as vital information was held back by the banks at the time of the banking guarantee we are within our rights to renege on the guarantee and let the senior bondholders to feel some pain.
With the bank debt off the books Ireland is still in a pretty poor position with regard to its budget deficit but not in the mire that it is in now. The markets have not responded well to the "Bailout" as they can see that there will now be no chance of recovery for Ireland in the short or medium term.

Regards
Beirnie

hi Beirnie,

your question is purely rhethorical as you don't mention how much your small amount is versus what your crippling amount is.
it is very possible that the markets might even increase the rate from 9.5% (am I mistaken in saying I heard the Latvian ambassador saying that their bond rates were 13% ) at least now we have a good idea as to what we have to pay over the medium term.

assuming that we can't slash public expenditure overnight to match the value of tax taken in ( a 19 billion reduction ) we are looking at borrowing for a long time to come.

here is my understanding...

the 5.83% is an average interest rate for a credit facility from 3 different funding sources which ireland draws down as it needs to.

(in theory) we MAY not need to draw all of it down.

At LEAST 50% of the money going into the banks under "the bailout" is our own money.

the bulk of the facility is going to cover our deficit between now and 2014/15.

regards,

Gollem

Scofflaw

bcalchess wrote: »

Surely it would be better to borrow a smaller amount at 9.5% than a crippling amount at 5.7%. I am not advocating a sovereign default, but as vital information was held back by the banks at the time of the banking guarantee we are within our rights to renege on the guarantee and let the senior bondholders to feel some pain.
With the bank debt off the books Ireland is still in a pretty poor position with regard to its budget deficit but not in the mire that it is in now. The markets have not responded well to the "Bailout" as they can see that there will now be no chance of recovery for Ireland in the short or medium term.

Regards
Beirnie

We're not borrowing the €85bn - we're borrowing only what we need to borrow, as we need to borrow it. That means there is no option to "borrow a smaller amount", because we're talking about the next 4 years of government deficit (and the bank recapitalisation), and all the smaller amounts over that time add up to exactly the same as we'd borrow from the facility, because the facility is only another way of borrowing the same money. If the bond market rates drop below the facility rates, we can use the markets, if the bond market rates rise above the facility rates, we can use the facility.

In the absence of the facility, we would be looking at borrowing exactly the same amount of money as from the facility. The bailout facility is not in addition to the state deficit borrowing - it is a source for that borrowing. It is not one large loan - it is a facility for drawing loans. We do not pay anything for what we don't borrow.

cordially,
Scofflaw

bcalchess

Scofflaw wrote: »

We're not borrowing the €85bn - we're borrowing only what we need to borrow, as we need to borrow it. That means there is no option to "borrow a smaller amount", because we're talking about the next 4 years of government deficit (and the bank recapitalisation), and all the smaller amounts over that time add up to exactly the same as we'd borrow from the facility, because the facility is only another way of borrowing the same money. If the bond market rates drop below the facility rates, we can use the markets, if the bond market rates rise above the facility rates, we can use the facility.

In the absence of the facility, we would be looking at borrowing exactly the same amount of money as from the facility. The bailout facility is not in addition to the state deficit borrowing - it is a source for that borrowing. It is not one large loan - it is a facility for drawing loans. We do not pay anything for what we don't borrow.

cordially,
Scofflaw

This is all in the realms of the armchair economist but bear with me & my hypothetical situation.
The smaller amount comes about if we do not need to recapitalise the banks to the same degree as we are now being required. This would come about by doing a u-turn on the bank guarantee. Forcing a debt for equity swop for the senior bondholders, possibly resulting in loosing the EU/IMF facility and hence having to go back to the bond markets for funding. Borrow initially at the 9.5% plus rate for day to day expenditure. Continue the 4 year plan. Bond markets realise after they have moved on to the other PIGS that without the huge bank losses we are not in as bad shape thus rate drops, economy recovers & we all live happily ever after.

Regards
B:)

gollem_1975

bcalchess wrote: »

This is all in the realms of the armchair economist but bear with me & my hypothetical situation.
The smaller amount comes about if we do not need to recapitalise the banks to the same degree as we are now being required. This would come about by doing a u-turn on the bank guarantee. Forcing a debt for equity swop for the senior bondholders, possibly resulting in loosing the EU/IMF facility and hence having to go back to the bond markets for funding. Borrow initially at the 9.5% plus rate for day to day expenditure. Continue the 4 year plan. Bond markets realise after they have moved on to the other PIGS that without the huge bank losses we are not in as bad shape thus rate drops, economy recovers & we all live happily ever after.

Regards
B:)

yes but you are discounting the potential affects that "burning the bondholders" would have at this point in time.

no one knows what the outcome of this would be... but I for one don't think it ends in "we all live happily ever after"
the bank bailout only makes up a portion of the "facility" the rest of the money we would have to borrow anyway to deal with the deficit.

if we were to actually burn the bondholders we could quite feasibly kiss 9.5% rates goodbye.. there is nothing to say that the markets wouldn't increase our rates.. and if as scofflaw says the market rates improve to a level that they are preferable to the ECB facility we can avail of these rates.

If bondholders are to be burnt it will be as a result of a larger economy needing a bailout.

If and/or when this happens then I'm all for marinating the bondholders and getting out the BBQ's .

If on the otherhand we are the first country to do it when we have another option then we'll be like Serbia at the start of World War one.. remembered as the country who fscked up the euro/EU etc.

later12

bcalchess wrote: »

Forcing a debt for equity swop for the senior bondholders, possibly resulting in loosing the EU/IMF facility and hence having to go back to the bond markets for funding. Borrow initially at the 9.5% plus rate for day to day expenditure.

First of all, the above involves a veritable spitting into the faces of the bondholders; that, combined with losing the IMF-EU facility, would say goodbye to the 9.5% rate.

I love the way people casually brush off such an extortionate rate of interest. The idea that we would be somehow better of at yields of what, 12%? 15%? 18%? is mind boggling when our current rate averages 5.8%. And for how long would you suggest we expose ourselves to these inevitably higher rates? Until the markets decide they have changed their minds about a country, who by then has gone back on its agreement and abolished its banking system? Until the whole crisis is over?

Personally, I'd take our current EU agreement and consider progressively restructuring corporate debts down the line.

Scofflaw

bcalchess wrote: »

This is all in the realms of the armchair economist but bear with me & my hypothetical situation.
The smaller amount comes about if we do not need to recapitalise the banks to the same degree as we are now being required. This would come about by doing a u-turn on the bank guarantee. Forcing a debt for equity swop for the senior bondholders, possibly resulting in loosing the EU/IMF facility and hence having to go back to the bond markets for funding. Borrow initially at the 9.5% plus rate for day to day expenditure. Continue the 4 year plan. Bond markets realise after they have moved on to the other PIGS that without the huge bank losses we are not in as bad shape thus rate drops, economy recovers & we all live happily ever after.

Regards
B:)

That contains an assumption so wildly optimistic that even this government wouldn't dare make it, which is that we can default on senior debt - legally the safest possible debt according to every liquidation mechanism - and then the bond markets will, despite that default on the legally most secure debt (bar IMF), drop rates for selling us even less secure debt to below what they asked of us before we did it.

It's like defaulting on your mortgage, forcibly preventing the bank from repossessing your house, and then expecting them to give you a mortgage on another house at an even better rate - because this one won't be in negative equity, after all, right?

Frankly, if we could pull that off, we should also be able to achieve enormous GDP growth rates through the export of flying pigs.

impressed,
Scofflaw