Wouldn't we be here anyway, even without the bankers?

tails_naf

Maybe this has been touched on before - but didn't the whole bank bail out simply accelerate something that was going to happen anyway?

The amount of the bail-out we are paying back in 2011 is 5bn max.
Without that, we were still 15-20bn short on the balance sheets due to the difference between what we are taking in taxes and spending - so wouldn't we have eventually come to this juncture anyway?

I was surprised Miriam let Jack O Connor off so lightly last night when he went to insist that it was the bankers who are solely to blame, and not the dramatic increase in public spending we saw from 2001-2008.

The numbers speak for themselves, and I for one an glad that FG are talking about cutting some of the spending in the form of PS jobs - especially as they won't go after the front-line jobs (which should be protected) - they want to go after the 5k people in HSE admin who 'aren't even able to give a description of what job they do', that the ESRI showed over 2 years ago. There is lots of dead wood in the PS that can be cut before a single front line job goes...

Tipp Man

Without a shadow of doubt this country would be up the creek regardless of the banks but your not allowed to say that, you have to blame it on the banks

It was a disgrace that Miriam left o Connor off completly scot free last night

RobbieTheRobber

yes but without the weight of the banks debts hanging from our necks we would not as far as i know be given the high rate of interest from any borrowings the state would need to make before we could bring spending in line with earnings.

So no, we would have problems but not these problems.

Riskymove

RobbieTheRobber wrote: »

yes but without the weight of the banks debts hanging from our necks we would not as far as i know be given the high rate of interest from any borrowings the state would need to make before we could bring spending in line with earnings.

that's it really, we would need to be tackling the deficit after the property collapse anyway...

..though if there was no property boom then we wouldn't have such high spending and we wouldn't have problems with banks so its all connected really

certainly if we had not had to spend so much on banks we would not have IMF/EU in (yet)

Tipp Man

Riskymove wrote: »

that's it really, we would need to be tackling the deficit after the property collapse anyway...

..though if there was no property boom then we wouldn't have such high spending and we wouldn't have problems with banks so its all connected really

certainly if we had not had to spend so much on banks we would not have IMF/EU in (yet)

It's all irrelevant really but just for the sake of debate let's look at the numbers

Of the 85 billion borrowed last week, 10 went to banks immediately, and 25 is there on call for the banks, but 50 is to cover the budget deficit for the next 4 years. The budget deficit is getting the majority of the money, especially if the banks dont call on the 25, although I feel they will call on some of it

Of course you can argue that without the banks our rate would be lower, no IMF etc but still huge huge borrowings

For certain though the public spending has recieved a lot lot less attention from the media, and general public, than it should have. The spending problems in this country have not gotten near enough attention

Thedogsgone

Everybody from the IMF to the ECB to the German Bundesbank have recognised that the reckless lending policies and the subsequent failure of the banks have led to a massive cost to the state.

Plus the money we are currently borrowing is on top of over 30 billion that has already gone into the failed banks.

After all this we will have two small to medium sized banks costing a fraction of what they do now.

FunnyStuff

Tipp Man wrote: »

Of the 85 billion borrowed last week, 10 went to banks immediately, and 25 is there on call for the banks, but 50 is to cover the budget deficit for the next 4 years. The budget deficit is getting the majority of the money, especially if the banks dont call on the 25, although I feel they will call on some of it

But here is the issue, the banks got 10Billion immediately, and 50 Billion is to cover the budget deficit. But since the downturn we have pumped nearly 50 Billion into the banks. So its not like the banks are getting only a small portion, with the 10 and previous 50, thats 60 Billion out of the 85 Billion that the banks have taken.

Without the banks, we would not be in nearly the mess we are in.

ei.sdraob

Riskymove wrote: »

that's it really, we would need to be tackling the deficit after the property collapse anyway...

..though if there was no property boom then we wouldn't have such high spending and we wouldn't have problems with banks so its all connected really

certainly if we had not had to spend so much on banks we would not have IMF/EU in (yet)

Jack wasn't complaining when the banks where lending to his members

or when and his salary well above inflation

Riskymove

ei.sdraob wrote: »

Jack wasn't complaining when the banks where lending to his members

or when and his salary well above inflation

what has that got to do with this thread or my comments?

RobbieTheRobber

Tipp Man wrote: »

It's all irrelevant really but just for the sake of debate let's look at the numbers

Of the 85 billion borrowed last week, 10 went to banks immediately, and 25 is there on call for the banks, but 50 is to cover the budget deficit for the next 4 years. The budget deficit is getting the majority of the money, especially if the banks dont call on the 25, although I feel they will call on some of it

Of course you can argue that without the banks our rate would be lower, no IMF etc but still huge huge borrowings

For certain though the public spending has recieved a lot lot less attention from the media, and general public, than it should have. The spending problems in this country have not gotten near enough attention

Yes tipp man but if we had not accepted responsibility for the banks liabilities then we would not be shut out of the bond markets, we would not have been given the crippling interest rates that we did and so on.

i understadn we would still have to bring public expenditre inline but that is achievable. th

Cookie_Monster

Tipp Man wrote: »

For certain though the public spending has recieved a lot lot less attention from the media, and general public, than it should have. The spending problems in this country have not gotten near enough attention

this

banks or no banks we are running a 20bn deficit this year alone, its insane money considering what little cuts in spending there have been

Tipp Man

FunnyStuff wrote: »

But here is the issue, the banks got 10Billion immediately, and 50 Billion is to cover the budget deficit. But since the downturn we have pumped nearly 50 Billion into the banks. So its not like the banks are getting only a small portion, with the 10 and previous 50, thats 60 Billion out of the 85 Billion that the banks have taken.

Without the banks, we would not be in nearly the mess we are in.

Just to correct a small thing, it's not 60 out of 85. It's 60 out of the total national debt which currently stands around 90 or 100 billion from the top of my head plus this new 85 billion fund

So by 2014 the banks will have cost 60 out of 175-185 billion and considering we had very little debt, in 2006 the total was about 35 billion, then yes public spending is a huge huge mess and is taking a larger portion of borrowing than the banks

Tipp Man

RobbieTheRobber wrote: »

Yes tipp man but if we had not accepted responsibility for the banks liabilities then we would not be shut out of the bond markets, we would not have been given the crippling interest rates that we did and so on.

i understadn we would still have to bring public expenditre inline but that is achievable. th

Even without the banks if we were borrowing only for government spending then our rates would have risen considerably, certainly not up to 8-9% which we had but probably in the 5% range which is not a whole lot less than what we are borrowing at anyway.

ei.sdraob

Riskymove wrote: »

what has that got to do with this thread or my comments?

see OP

I was surprised Miriam let Jack O Connor off so lightly last night when he went to insist that it was the bankers who are solely to blame, and not the dramatic increase in public spending we saw from 2001-2008.

zig

Either way we'd be here this year, and probably the next few years, but if it wasnt for the banks, or moreso FF attaching our sovereign debt to the banks we could get this mess out of the way, we could borrow for a much cheaper interest rate, we could solve our deficit problem and begin to grow, but instead, as soon as we have the deficit problems sorted we will experience a sluggish economy, possibly every year, our budget will just about keep us tied over, and with that there will be no real way of genuinely growing as an economy. That could last generations.

Riskymove

ei.sdraob wrote: »

see OP

ok why quote me?

SkepticOne

Tipp Man wrote: »

It's all irrelevant really but just for the sake of debate let's look at the numbers

Of the 85 billion borrowed last week, 10 went to banks immediately, and 25 is there on call for the banks, but 50 is to cover the budget deficit for the next 4 years. The budget deficit is getting the majority of the money, especially if the banks dont call on the 25, although I feel they will call on some of it

Of course you can argue that without the banks our rate would be lower, no IMF etc but still huge huge borrowings

For certain though the public spending has recieved a lot lot less attention from the media, and general public, than it should have. The spending problems in this country have not gotten near enough attention

We didn't borrow 85 billion last week though. The total loan package is 67 billion. In order to get that, 35 billion has to be committed to the banks. This represents 53% of the total amount.

I've a big problem with the 85 billion that is often quoted. It seems to have been arrived at by adding money that Ireland had already raised before the bailout to the bailout loan itself.

ilovesleep

zig wrote: »

Either way we'd be here this year, and probably the next few years, but if it wasnt for the banks, or moreso FF attaching our sovereign debt to the banks we could get this mess out of the way, we could borrow for a much cheaper interest rate, we could solve our deficit problem and begin to grow, but instead, as soon as we have the deficit problems sorted we will experience a sluggish economy, possibly every year, our budget will just about keep us tied over, and with that there will be no real way of genuinely growing as an economy. That could last generations.

Is there any way those two debts can be divided and not let the taxpayer to pay for the banks. I know the country is going down but it may not be half as bad if those two debts were seprated.

gollem_1975

RobbieTheRobber wrote: »

yes but without the weight of the banks debts hanging from our necks we would not as far as i know be given the high rate of interest from any borrowings the state would need to make before we could bring spending in line with earnings.

So no, we would have problems but not these problems.

hmmm and here was me thinking the only reason we were getting the bailout was because it was in the interest of the ECB/EU/IMF for the banks not to fail

Do you think we would have been able to borrow 19 billion in the current "international" climate at favourable interest rates just so we could sustain our "generous" PS salary and welfare rates ?

Tipp Man

SkepticOne wrote: »

We didn't borrow 85 billion last week though. The total loan package is 67 billion. In order to get that, 35 billion has to be committed to the banks. This represents 53% of the total amount.

I've a big problem with the 85 billion that is often quoted. It seems to have been arrived at by adding money that Ireland had already raised before the bailout to the bailout loan itself.

I see what your saying regards the nprf, but I have to question your figures then

The 10 billion for the banks came from nprf so how can you say that it is 53% of the actual loaned money??

Also you are taking the full potential costs of the banks, ie 35 bn, potentially 25 of this 35 billion may never become a liability

So when you take both these points into account a person could assume that the entire IMF bailout is to cover government spending;). But I wouldn't suggest that

irishh_bob

tails_naf wrote: »

Maybe this has been touched on before - but didn't the whole bank bail out simply accelerate something that was going to happen anyway?

The amount of the bail-out we are paying back in 2011 is 5bn max.
Without that, we were still 15-20bn short on the balance sheets due to the difference between what we are taking in taxes and spending - so wouldn't we have eventually come to this juncture anyway?

I was surprised Miriam let Jack O Connor off so lightly last night when he went to insist that it was the bankers who are solely to blame, and not the dramatic increase in public spending we saw from 2001-2008.

The numbers speak for themselves, and I for one an glad that FG are talking about cutting some of the spending in the form of PS jobs - especially as they won't go after the front-line jobs (which should be protected) - they want to go after the 5k people in HSE admin who 'aren't even able to give a description of what job they do', that the ESRI showed over 2 years ago. There is lots of dead wood in the PS that can be cut before a single front line job goes...

the banking bailout ( noose around our necks) dwarfes every other fiscal challenge we have to contend with , it blows everything else out of the stratosphere , without it , we would be just another country with an income - expendeture imbalance , even we were all to pay 90% of what we earn in tax , it wouldnt cover the debt commitments the bank bailout has saddled us with

its a time bomb

Riskymove

wow a thread where most people (generally) agree....and I find myself on a similar page to irish bob and tippman!!!

the sky is falling!!

zig

ilovesleep wrote: »

Is there any way those two debts can be divided and not let the taxpayer to pay for the banks. I know the country is going down but it may not be half as bad if those two debts were seprated.

Well there is the option of saying 'right lads sorry we made a mistake in 2008 we just cant pay you back' and default on our debts.
This would leave us with only our sovereign debt, this is a debt I believe we should pay, cause its money we as the taxpayer spent.
Some people here will tell you this would be disastrous cause we'd have to have instant massive cuts. While this is true, I believe it would get us out of this mess in the long run , it would take the weight off our shoulders, and in a few more years we'd be 'free' to grow.
But the only parties willing to do that are the shinners and the other lefties.

Many economists think this is going to happen anyway in the next few years because we simply wont be able to pay our debts. So time will tell I guess.

Tipp Man

irishh_bob wrote: »

the banking bailout ( noose around our necks) dwarfes every other fiscal challenge we have to contend with , it blows everything else out of the stratosphere , without it , we would be just another country with an income - expendeture imbalance , even we were all to pay 90% of what we earn in tax , it wouldnt cover the debt commitments the bank bailout has saddled us with

its a time bomb

Not strictly true that the bank debt dwarfs every other fiscal challenge

Between 2008 and 2011 we will have borrowed the equivalent of the bank bailout just to cover the government shortfall. So the bank bailout is equal to 4 years deficits

zig

Riskymove wrote: »

wow a thread where most people (generally) agree....and I find myself on a similar page to irish bob and tippman!!!

the sky is falling!!

I didnt really get the impression the two on them are on a similar page tbh.

gollem_1975

irishh_bob wrote: »

the banking bailout ( noose around our necks) dwarfes every other fiscal challenge we have to contend with , it blows everything else out of the stratosphere , without it , we would be just another country with an income - expendeture imbalance , even we were all to pay 90% of what we earn in tax , it wouldnt cover the debt commitments the bank bailout has saddled us with

its a time bomb

if the bailout is a time bomb.. then what type of ordinance is the alternative ?

ps: a time bomb might never go off

Riskymove

zig wrote: »

I didnt really get the impression the two on them are on a similar page tbh.

meh ....they have a differing view on exactly what impact the bank bailout would have our borrowing ability and interest rates

everyone is basically agreeing with the underlying question in the post that we'd be here trying to reduce the deficit either way through cuts and taxes

compared to most issues, this is practically a love-in!

Inchenagh

I believe that the focus on FF and our banks is a red herring. The idea that our destiny would be different if only we had negotiated a better deal with the IMF is flawed. The entire monetary system of the western world is on the verge of collapse. The Euro in particular will not last another six months. There are a few possible scenarios but all will leave ireland with its Punt and sovereign debt default. It is not clear whether Germany will unilaterally leave the Euro to its own devices as per Angela Merkels statement this week, or whether Ireland and the other PIIGS will just be turfed out. Either way, Ireland with a new currency will be in crisis. A new Punt will immediately devalue massively against the euro. Without any real place in the money markets, it will taker at least a month for the punt to acquire a stable exchange rate. This month will be like 1973, - without any oil coming into the country. I have made up a list of essential supplies every household should have:

The List

Power:
Rechargeable AA Batteries (NMh) 10 x 4packs (minimum) and charger.
Candles – 500 tea lights
LED lamps x 10 (Ikea)
Torch
Super Ser type gas heater with 2 tanks
Matches /lighters x 10
Small single solar panel with inverter (100-200w)
Small diesel (or petrol) generator (3-5kW) (Aldi 299.00)

Fuel
Coal, Briquettes, logs (lots) and firelighters (4 packs)
Minimum 1X 5 gal jerry can of petrol / Diesel (car)

Food preparation / storage
Gas camping stove with cylinders
Pressure cooker
Tin foil and freezer bags

Water
Britax filter jug with 8 refills
4 x 5 gallon plastic storage containers with spigots.
Outside water butt

Health
First aid kit,
Fire extinguisher CO2,
Soap, Shampoo, Toothpaste, Pain killers, antibiotics, vitamins,
Medicines used.
Tissues and womens supplies

Food
4 weeks supplies - include Salt, Sugar, Honey, Spices, vinegar,
Rice, Pasta, Oats, dried milk
Tinned meat, beans, soups
Oils, Frozen food.

Household
Detergents, soap, plastic sacks,
Glues, tapes

zig

Where are you getting 6 months from?

Roadtrippin

I think the banks' debt plays a major role in the situation we're in but it's not the only cause.
I'm sure most of us agree that the government is partially to blame for not making sure that the banking sector was regulated enough. But also individuals taking on more debt (whether it was mortgages, credit cards etc.) than they could afford have a part in it. Sure why would they not have taken out that mortgage if the bank allowed them to? I think if we compare Ireland to other countries though a lot of people lived well beyond their means before the recession hit and weren't cautioned against it.
Wages, property values, prices for retail goods were increasing to unsustainable levels over the years before the recession hit because no regulations were put in place. Whatever the market dictated. That only works for so long...

Liam Byrne

Public sector certainly needs to be reformed, particularly top-heavy "management" and those earning over €100,000, which we simply can't afford.

However those are legitimate debts of this state.

The banking debts are not.

THAT is why the banking debts are more objectionable. We didn't agree to them or sign up to them or vote for them or anything remotely democratic.

They are not our debts.

Scofflaw

FunnyStuff wrote: »

But here is the issue, the banks got 10Billion immediately, and 50 Billion is to cover the budget deficit. But since the downturn we have pumped nearly 50 Billion into the banks. So its not like the banks are getting only a small portion, with the 10 and previous 50, thats 60 Billion out of the 85 Billion that the banks have taken.

Without the banks, we would not be in nearly the mess we are in.

Except that we've had a couple of years of deficit already too - 13.15bn in 2008, 22.96bn in 2009, 20bn this year. Total €56.1bn - just government deficit, without the banks. The €50bn in the bailout is for the next 4-5 years.

On top of that, the government deficit is 'real' deficit - the money has actually been spent - whereas the bank money is 'liability' in the form of promissory notes. If the banks can be returned to normality without those promissory notes being called in, they move back off the balance sheets again without any money having changed hands.

Still, as Liam says, the point remains that we should not have reached a position where the banks' liabilities were transferred to the state. I can see why they have been, and I genuinely don't see that there was much choice about it, given the position we had reached - but the point remains that that position should never have been reached, and must not be reached again.

cordially,
Scofflaw

SkepticOne

Tipp Man wrote: »

I see what your saying regards the nprf, but I have to question your figures then

The 10 billion for the banks came from nprf so how can you say that it is 53% of the actual loaned money??

Also you are taking the full potential costs of the banks, ie 35 bn, potentially 25 of this 35 billion may never become a liability

So when you take both these points into account a person could assume that the entire IMF bailout is to cover government spending;). But I wouldn't suggest that

No the total amount lent, 67 billion, comes from a combination of the IMF and the EU. 35 billion (10 billion immediately and 25 on a contingency basis) is 53 percent of 67 billion.

SkepticOne

I think the answer to the question is that we'd still be in difficulty with the deficit, however the banking situation brought things to a head.

It is not just the amount that the various bank rescues have cost but also the seeming lack of judgement on the part of the government in dealing with the situation, the feeling that the money is going into a black hole despite the government telling everybody at every stage that we've seen the end of it, that "we've turned the corner".

But the two problems: the deficit and the banking problems are very interrelated. It was reckless lending on the part of the banks that contributed (not the whole story obviously) to the housing bubble which in turn led to the construction boom. The banks continued to lend to builders even after the bubble had burst. And while all this was happening the government though taxes raised from the boom was able to increase spending resulting in the current deficit when the boom stopped.

tails_naf

RobbieTheRobber wrote: »

Yes tipp man but if we had not accepted responsibility for the banks liabilities then we would not be shut out of the bond markets, we would not have been given the crippling interest rates that we did and so on.

i understadn we would still have to bring public expenditre inline but that is achievable. th

but the deficit would sink us at ANY interest rate. if we borrowed at 1%, the deficit was 15-20 bn a year,

so after year 1, we're down 20bn
after year 2 we're down 40bn,
after year 3 we're down 60bn,

so the deficit was going to snooker us anyway, and it was going to happen sooner rather than later

Scofflaw

SkepticOne wrote: »

No the total amount lent, 67 billion, comes from a combination of the IMF and the EU. 35 billion (10 billion immediately and 25 on a contingency basis) is 53 percent of 67 billion.

Or we could equally say that the amount loaned us for government deficit is 50 out of the 67.5 - about 75%. It's more justifiable than your figure, since the money for the banks is largely coming from the Irish government, and most of it is not therefore part of the borrowed sum.

It seems a pity that despite the fact that we all agree that the banks are a problem, some people still feel the need to cook the books to make them out to be more of a problem than they are.

If we take 50bn put into the banks already (including NAMA), and add the full 35bn in the bailout facility, we still don't reach the 106bn of government deficit over the same period. And the banks - at least in theory - may yield some money back. Leaving that aside, we seem to have a position where the banks can be regarded as somewhere between 36% and 44.5% of the overall debts of the Irish government.

cordially,
Scofflaw

SkepticOne

Scofflaw wrote: »

Or we could equally say that the amount loaned us for government deficit is 50 out of the 67.5 - about 75%. It's more justifiable than your figure, since the money for the banks is largely coming from the Irish government, and most of it is not therefore part of the borrowed sum.

No we're not required to spend 50 billion on the deficit. If we were to spend less than that, the EU/IMF consortium would be perfectly happy. What we're specifically required to do is commit 35 billion to the banks. If we don't do that we don't get the money.

It is the fact that the 35 billion is a requirement of the loan which gives it the priority in the figures.

Since this money (35 billion) is committed the banks, it is now appropriate to see how much is left of the loan for public services.

67.5 - 35 = 32.5 billion.

So 32.5 is left over which we can spend on public services if we wish.

Note that I've left out our reserves and any other money that we've raised externally prior to the IMF/EU loan. I think you and most other people will agree that it is misleading to include this money. Yes, if you wish you can say that the bank bailout is coming out of our own reserves and the EU loan is mainly for public spending. This is how those who agreed on the package have chosen to describe things. But it is just one way and, as I have argued, the most misleading way.

It seems a pity that despite the fact that we all agree that the banks are a problem, some people still feel the need to cook the books to make them out to be more of a problem than they are.

Well, I think the cooking has mainly been done to place as much of the blame on Irish citizens for banking problems.

The message Europe wants to give is: "Ireland needs to sort out the its banking problems, but we're (the EU) here to help pay for old age pensions and social security and hospitals."

The message they don't want to give is that they are scared of the banking situation in Ireland, Portugal and Spain.

My interest in clarifying these matters is to undo the cooking of the books by our books for political reasons. That is why I've chosen a more standard way of accounting for the sums involved.

If we take 50bn put into the banks already (including NAMA), and add the full 35bn in the bailout facility, we still don't reach the 106bn of government deficit over the same period. And the banks - at least in theory - may yield some money back. Leaving that aside, we seem to have a position where the banks can be regarded as somewhere between 36% and 44.5% of the overall debts of the Irish government.

I agree with you here, that is why I said earlier that we would still be in difficulty with the deficit alone. The banking problems helped bring things to a head when they did.

The point you were taking issue with, however, was the issue of the bailout amounts. My argument here is very simple: if you accept that the total bailout amount is 67.5 billion, then the fact that 35 is for the banks and 32 remains for public spending, then it is 53% about the banks.

If you cast your mind back to when the rumours of the bailout were taking place. Only a few weeks ago. You insisted that these were only rumours on the basis that we had enough for public spending until the middle of next year. You even modified the title of someone else's thread to this effect.

Well, to a certain extent you were justified. The reason is that this was not the normal situation where a country goes begging for a bailout. In this situation others were begging us to take a bailout. But not any bailout: a bailout where the condition is that most of the money must be committed to the banks. This was not a condition we insisted on; they insisted on it.

So getting back to the original question of the OP, there are two aspects to this. From an Irish perspective, the problem is a combination of the public deficit and the banks. From a European perspective, the problem is more heavily weighted towards the banks.

Little Mickey

Tipp Man wrote: »

For certain though the public spending has recieved a lot lot less attention from the media, and general public, than it should have. The spending problems in this country have not gotten near enough attention

Agreed, as just a "small" example, what have the thousands that will be left go from the HSE been doing all along?

jimmycrackcorm

SkepticOne wrote: »

No we're not required to spend 50 billion on the deficit. .

Why do you think the deficit will magically disappear? We are required to spend it on the deficit because we will have a deficit of this amount over the next three years.

SkepticOne

jimmycrackcorm wrote: »

Why do you think the deficit will magically disappear? We are required to spend it on the deficit because we will have a deficit of this amount over the next three years.

I don't think it will disappear however if we decided to tackle the deficit in a more aggressive manner thereby reducing it, we would not be upsetting the EU/IMF consortium. That figure represents an upper limit on spending rather than a figure we must meet. This is how it differs from the 35 for the banks. We must commit that to the banks in order to get the 67.5 billion bailout. Basically the point is that from the EU perspective, the bailout is about protecting the banking system primarily.

Scofflaw

SkepticOne wrote: »

I don't think it will disappear however if we decided to tackle the deficit in a more aggressive manner thereby reducing it, we would not be upsetting the EU/IMF consortium. That figure represents an upper limit on spending rather than a figure we must meet. This is how it differs from the 35 for the banks. We must commit that to the banks in order to get the 67.5 billion bailout. Basically the point is that from the EU perspective, the bailout is about protecting the banking system primarily.

€10bn to the banks - as estimated by Fianna Fáil. €25bn in extra 'contingency money' for the banks which, according to Fianna Fáil isn't necessary - except that they admitted they might be up to 300% out in their estimates of how much money the banks really needed.

'Contingency' is a word with a meaning - it means that it doesn't have to be used. That leaves you in the difficult position where accepting "...we must commit that to the banks in order to get the 67.5 billion bailout" involves abandoning the English language for some alternative - indeed opposite - set of meanings decided on by you.

The bailout deal contains only the money for banks estimated by Fianna Fáil as required for the support they intend to continue offering the banks, plus a very large amount of additional money in case their current maths on bank bailouts follows their earlier pattern of estimates. Either way, the claim that we're being forced to take money to bail out the banks is rubbish - what's in the bailout is what the government asked for, for the support they want to give the banks.

cordially,
Scofflaw

SkepticOne

Scofflaw wrote: »

'Contingency' is a word with a meaning - it means that it doesn't have to be used. That leaves you in the difficult position where accepting "...we must commit that to the banks in order to get the 67.5 billion bailout" involves abandoning the English language for some alternative - indeed opposite - set of meanings decided on by you.

It may (though unlikely, imo) turn out be that the money won't be needed, however the thing we have no choice about (since it was a requirement of getting the 67 billion loan) is that we have to set the money aside for the banks. We can't spend it on anything else. If the banks require it, we must supply it. So in that sense, the money is committed to the banks.

Now you may argue that, since Fianna Fail have been throwing money at the banks over the last couple of years, it is hardly a great burden on them to be made to commit up to a further 35 billion. What I think is being left out is that the choice to carry out a bank resolution of the type recommended by many experts has been removed from future governments over the lifetime of the loan under the terms of the deal. Up to 35 billion must be supplied to the banks, and any mechanism that might involve senior bond holders taking a justified (imo) hit has been ruled out.

You may well, of course, feel that this is justified. My purpose is merely to make the facts known. It is not simply about the deficit; it is also about the banks, and from the perspective of the European bailout, it is mainly about the banks.

Scofflaw

SkepticOne wrote: »

It may (though unlikely, imo) turn out be that the money won't be needed, however the thing we have no choice about (since it was a requirement of getting the 67 billion loan) is that we have to set the money aside for the banks. We can't spend it on anything else. If the banks require it, we must supply it. So in that sense, the money is committed to the banks.

Again, you've jumped from one statement to another statement not supported by the first through a sleight of hand. Yes, that money has been given as a contingency fund for the banks - no, that doesn't mean we have to spend it. If the government is correct in their assessment of what the banks need, it doesn't have to be spent - if they're wrong, it is available. So, no, in the sense you're using it, and in the sense your argument requires, that money is not "committed to the banks".

Let's put it into a more homely example. If I lend you a tenner to get from A to B, and an extra €25 as contingency money in case of emergencies, you are not committed to spending that money. You can do so, if there's an emergency of some kind, but you are not committed to doing so.

SkepticOne wrote: »

Now you may argue that, since Fianna Fail have been throwing money at the banks over the last couple of years, it is hardly a great burden on them to be made to commit up to a further 35 billion. What I think is being left out is that the choice to carry out a bank resolution of the type recommended by many experts has been removed from future governments over the lifetime of the loan under the terms of the deal. Up to 35 billion must be supplied to the banks, and any mechanism that might involve senior bond holders taking a justified (imo) hit has been ruled out.

Justified or not, it remains neither a legal option, nor a cost-free one.

SkepticOne wrote: »

You may well, of course, feel that this is justified. My purpose is merely to make the facts known. It is not simply about the deficit; it is also about the banks, and from the perspective of the European bailout, it is mainly about the banks.

An argument which the facts don't support, as I keep pointing out to you. You're having to play fast and loose with both the facts and the English language in order to make it at all - using 'committed' as in 'available only for' and trying to pretend it means 'required to spend', ignoring the fact that the money for the banks is being largely supplied by Ireland rather than through external assistance, ignoring the government's role in negotiating the terms of the deal, their prior commitments to bank support, the decision to use the NPRF for bank support being already in the 4 year plan, the way that the majority of the external support is for state spending.

As I've already said, it's an attractive story, at least for those who prefer to blame their problems on outside forces (and we're not short on those), but it's only a story, and it unfortunately fails to match the facts.

cordially,
Scofflaw

Tipp Man

Surely the best way to look at the bank bailout is to look at the overall borrowing position as at 2014 (or projection thereof). I think it is to narrow to say well 10bn came from here or this 10bn is only for this etc

Permabear

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SkepticOne

Scofflaw wrote: »

Again, you've jumped from one statement to another statement not supported by the first through a sleight of hand. Yes, that money has been given as a contingency fund for the banks - no, that doesn't mean we have to spend it. If the government is correct in their assessment of what the banks need, it doesn't have to be spent - if they're wrong, it is available. So, no, in the sense you're using it, and in the sense your argument requires, that money is not "committed to the banks".

Where you are wrong is in the the statement: " If the government is correct in their assessment of what the banks need, it doesn't have to be spent - if they're wrong, it is available."

The problem is in the words "it is available" at the very end. It gives the impression that there's a some of money passively lying about that can be drawn upon by the government to assist with helping the banks. That is not the case.

There is no separate sum of money. This is tax payers money that must be raised (note the word "must") should the banks require it. The option to let the banks go, share some of the burden with senior bond holders, perform a debt-for-equity swap or some other bank resolution mechanism has been signed away by Ireland, in order to get the 67.5 billion bailout deal.

Here's a better version. Note the change at the end:

" If the government is correct in their assessment of what the banks need, it doesn't have to be spent - if they're wrong, the money must be provided".

Let's put it into a more homely example. If I lend you a tenner to get from A to B, and an extra €25 as contingency money in case of emergencies, you are not committed to spending that money. You can do so, if there's an emergency of some kind, but you are not committed to doing so.

No, I don't think that is the a good analogy to be honest. The thing I have to commit to is the preservation of formerly private entities up to a total of 35 billion. I would love to believe the government is right (I'm assuming you are correct here) and that only 10 billion will be required, but if it turns out they are wrong (and their track record in this department is not great) then the more of that money must be supplied up to a total of 35 billion. This is where we don't have an option, and this applies to future governments who may not have the same philosophy of propping up failed entities regardless of the cost to the state.

Justified or not, it remains neither a legal option, nor a cost-free one.

You are entitled to feel it is not justified. Others may of course beg to differ. And we can argue about the legality of it. However it was an option up to the point it was given away and this is the basic fact of the matter.

An argument which the facts don't support, as I keep pointing out to you. You're having to play fast and loose with both the facts and the English language in order to make it at all - using 'committed' as in 'available only for' and trying to pretend it means 'required to spend', ignoring the fact that the money for the banks is being largely supplied by Ireland rather than through external assistance, ignoring the government's role in negotiating the terms of the deal, their prior commitments to bank support, the decision to use the NPRF for bank support being already in the 4 year plan, the way that the majority of the external support is for state spending.

No, I think I have been very plain and unambiguous in my language. I think those that made the deal have been spinning the situation and what I am trying to do is point that out. I think you are trying to confuse the issue by misinterpreting what I'm saying. Committing 35 billion to the banks does not mean that 35 will definitely be poured into the banks straight away, so stop making out that that is what I meant. You might have been excused for thinking that initially but I have since clarified exactly what I meant.

As I've already said, it's an attractive story, at least for those who prefer to blame their problems on outside forces (and we're not short on those), but it's only a story, and it unfortunately fails to match the facts.

I wish you were correct that it fails to match the facts. Unfortunately, that is not the case.

SkepticOne

donegalfella wrote: »

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I agree with this. It is the combination of the two. The thing that I would point out, though, is that in the wake of the bubble bursting, the Government seemed to have some sort of a grip on the deficit situation. The knew how large it was and what needed to be done. People may have disagreed with the pace of the measures but most people (bar the unions) agreed with the government that there had to be cuts.

It was a very different situation with the banks. Here the government initially denied that any problem existed. Then it was minor liquidity issues for which the government guarantee scheme would quickly restore confidence. Then NAMA would sort out everything and get the banks lending. Then Anglo was nationalised and it would only take 4 billion to sort it out (I think it is a at about 35 billion and counting). And so on.

It was this black hole situation that got the lenders exasperated and drove bond yields up and brought things to a head. But like I pointed out earlier, the banks and the deficit are both symptoms of the same problem, the bursting of a bubble that the people in charge did not acknowledge existed in the first place.

The solution is to tackle the deficit aggressively on the one hand and on the other, try to shift as much of the banking burden on to those that invested unwisely and should have lost anyway but for the intervention of the Irish government.

Permabear

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The_Honeybadger

Haven't read the whole thread but my take on things is that the banking collapse & explosion in public and private spending over the past decade are totally intertwined, neither would have been possible without the other, so pointing fingers and saying it was so and so's fault is utterly pointless. Jack O'Connor and his members never would have gotten the salaries they now enjoy were it not for the billions the banks lent into the economy to artificially inflate it. And people who were condemning what was going on was shouted down, somebody on here posted a newsclip from 2001 (I think) where the ESRI called on Bertie to introduce policies to cool our runaway economic growth and Bertie dismissed their findings as nonsense, we were always heading for disaster with people like that in charge, that said if he had done anything but fuel the boom FF would have been voted out and replaced by FG, who then would have gone on in turn to wreck our finances, so it is hard to say who is to blame, everybody in a way.

SkepticOne

donegalfella wrote: »

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I've no argument with people who say we need to make a major budgetary adjustment. My main argument is with people who say that the state must carry the losses of private entities operating within the state even when the cost of doing so brings the country to its knees. We are in the odd situation now of making (necessary) cuts in public spending on one hand while continuing to shove money into the banks on the other - plugging one hole while removing the plug from another.

SkepticOne

mickeyk wrote: »

Haven't read the whole thread but my take on things is that the banking collapse & explosion in public and private spending over the past decade are totally intertwined, neither would have been possible without the other, so pointing fingers and saying it was so and so's fault is utterly pointless. Jack O'Connor and his members never would have gotten the salaries they now enjoy were it not for the billions the banks lent into the economy to artificially inflate it. And people who were condemning what was going on was shouted down, somebody on here posted a newsclip from 2001 (I think) where the ESRI called on Bertie to introduce policies to cool our runaway economic growth and Bertie dismissed their findings as nonsense, we were always heading for disaster with people like that in charge, that said if he had done anything but fuel the boom FF would have been voted out and replaced by FG, who then would have gone on in turn to wreck our finances, so it is hard to say who is to blame, everybody in a way.

No one was able tell the government anything and this led to the twin problems of the deficit and the banks. Likewise in the aftermath of the bubble bursting, no one was able to tell the government of the folly of the likes of NAMA or the rescuing of Anglo.