Could we borrow from china instead of the IMF

lightspeed

I was listening to Al Jazerra English and they were discussing china and although some commentators mad the point about how china was trying to build up allies across the world to further spread their dominance across the world it also mentioned that in the past 2 years China has lent out more money than the ECB and another factor why china is eager to lent money out might be that its bought up so much of the US dollar that as the dollar declines in value they are losing over $200 billion a year. So would china have been or could they be willing to lend the money instead of the IMF that ireland so desperately needs at a better interest rate?

later12

China were (in all probability) the big bidders in the recent EFSF and EFSM bond auctions, along with the japanese, so they are already extending credit to the Irish by default (unfortunate term).

They probably have no interest in extending credit to us individually since they wish to protect the euro and indeed to increase the euro's worth as a reserve global currency. Therefore it is in their best interests to co-operate with the core Europeans as well as the peripherals in supporting the agreed European crisis response (bailout) framework already in place. They have far more interest in that than in little old Ireland itself.

lightspeed

ok that seems to answer my question and makes sense. it kind of shows how its not all about getting ireland back on its feet and more about making a hefty profit in the process without upsetting all the others that want a slice of the irish bailout pie. If im not mistaken i heard it took just 15 minutes to aquire the bailout money for the IMF for its proposed bailouts across Europe for the amount of €500 billion and that it cost much less than they thought to secure this amount so why cant they renegotiate the interest rate given to ireland? Is it just that they dont want to reallly and know they screwed us a bit on that interest rate?
Not that i blame the IMF or the EU for irelands economic position at the moment.

later12

lightspeed wrote: »

it kind of shows how its not all about getting ireland back on its feet and more about making a hefty profit in the process without upsetting all the others that want a slice of the irish bailout pie.

With respect I don't think it is either.

China and Japan don't particularly worry about Ireland, but they do worry for the euro and its strength, and potential, as a global reserve currency. This is the case particularly since they sit on large reserve crates of the stuff in Beijing and Tokyo.

they're not making a particularly hefty profit on the Irish and European bailout, they have far greater earning potential elsewhere. So while it helps, I don't think they profit is the major inspiration for their interest itself. They genuinely, and for their own financial reasons, want to see a healthy euro currency.

If im not mistaken i heard it took just 15 minutes to aquire the bailout money for the IMF for its proposed bailouts across Europe for the amount of €500 billion and that it cost much less than they thought to secure this amount so why cant they renegotiate the interest rate given to ireland?

They can and probably will, in my opinion. The reason that the interest rate is so high (although some people argue that point quite convincingly) is because of the German practice of limited liability on extending credit by offering such a highly rated bond to international investors. With the crisis evolving daily, the Germans (and other core economies) now look more willing to pull back on exercising this limited liability, seem ready to increase their exposure, and so may offer room for increasing the effective European bailout fund size itself as well as an interest rate reduction.

pigeonbutler

lightspeed wrote: »

ok that seems to answer my question and makes sense. it kind of shows how its not all about getting ireland back on its feet and more about making a hefty profit in the process without upsetting all the others that want a slice of the irish bailout pie. If im not mistaken i heard it took just 15 minutes to aquire the bailout money for the IMF for its proposed bailouts across Europe for the amount of €500 billion and that it cost much less than they thought to secure this amount so why cant they renegotiate the interest rate given to ireland? Is it just that they dont want to reallly and know they screwed us a bit on that interest rate?
Not that i blame the IMF or the EU for irelands economic position at the moment.

Well, the markets are currently trading Irish 10 year sovereign debt at a yield of about 8.9%.

Very basic economic theory would tell you that this means anybody lending us money at less than this rate (5.8% from EU/IMF ) is effectively being benevolent to us by providing it a rate which doesn't justify the perceived risk of default.

So far from screwing us, contrary to popular opinion the IMF and EU are being generous to us. I think the view that we can "renegotiate" the interest rate is hilarious. What are we going to negotiate with? It'd be more correct to say we can BEG for a lower rate.

Our only possible bargaining chip is the threat of defaulting on the bank debts. This would force the hand of the EU as French banks, German banks and the ECB would suffer big losses. However if the ECB retaliated by stopping providing liquidity to our financial system and/or the EU stopped providing the State with any further funding we'd literally run out of money very fast. ATM's would be empty, banks wouldn't be able to repay depositors, the State's pay cheques would bounce.

later12

pigeonbutler wrote: »

Well, the markets are currently trading Irish 10 year sovereign debt at a yield of about 8.9%.

Very basic economic theory would tell you that this means anybody lending us money at less than this rate (5.8% from EU/IMF ) is effectively being benevolent to us by providing it a rate which doesn't justify the perceived risk of default.

Not quite. By that definition, a rate of 8.5% would be 'benevolent'.

The Eurozone constituent members must realise that in accepting the need to shoulder bank debt, the Irish taxpayer is playing a significant role in amerliorating the perception of the stability of the Euro and of the Union. Yes it is to our benefit, but the rest of the eurozone is sharing in the benefit as well. They are not just acting altruistically here, and while the importance of that fact is often exaggerated, that nevertheless deserves to be acknowledged.

So far from screwing us, contrary to popular opinion the IMF and EU are being generous to us. I think the view that we can "renegotiate" the interest rate is hilarious. What are we going to negotiate with? It'd be more correct to say we can BEG for a lower rate.

In agreeing to giving up greater fiscal independence and in transferring a greater budgetary role to Europe, we are aiding the stability of the Eurozone, and in return could realistically expect a lower rate of interest payable on our debt.

It is quite incorrect to suggest that the only bargaining chip is the threat of default, that is not a bargaining chip at all since such an act would be calamitous for everybody concerned.

lightspeed

thats all well in good to try and bargain the rate and negotiate on the basis that if we fall so will the euro and will effect all of the Eu and the rest of the world perhaps to a lesser extent but my main worry would be that Ireland could just get kicked out of the EU for not accepting any help from the IMF or the ECB. Is that at all a possibility? I was thinking that if ireland refused to take the bailout from the IMF and approached china directly then maybe they could supply the money at a lesser rate as it would seem that china would prefer to do it via the IMF so as not to upset relations with the EU. As if Ireland really is such a threat to the euro surely they would be happy enough to give it to us directly at a lesser rate if we insisted? or is that not even possible to become an option for us?
I dont think its possible for the rate with the IMF to be renegotiated and its just being used as a football for Fine Gael particuarlly. Michael Noonan of Fine Gael is supposedly heading off to Brussells tomorrow to try and renegotiate the rate. I personally dont think thats a politcally wise move cause they will appear imcompetant before even getting elected when he has to come home back to ireland after being told to feck off and that no renegotiation is possible.

later12

lightspeed wrote: »

my main worry would be that Ireland could just get kicked out of the EU for not accepting any help from the IMF or the ECB. Is that at all a possibility?

No, there is currently no mechanism for a constituent member to be kicked out of the Eurozone, which is in itself typically daft of the bloc, but that's neither here nor there.

I dont think its possible for the rate with the IMF to be renegotiated and its just being used as a football for Fine Gael particuarlly.

You're right to refer to it as a bit of a political football. however I think the opposition are not enitirely incorrect in suggesting that the Government might have negotiated a better deal last year, and there are signs that the Germans are willing to move on the debt. This article came up in another thread. It's worth bearing in mind, however, that the new interest rate would be unlikely to be awe inspiring either.

http://www.irishtimes.com/newspaper/frontpage/2011/0126/1224288327446.html

GERMANY IS prepared to back lower-interest loans to Ireland and other peripheral euro zone countries if they agree to anchor a new “fiscal framework” in their constitutions.

Picking up the pace of euro zone reform, Chancellor Angela Merkel met European Commission president José Manuel Barroso yesterday evening to ease tensions after a public falling out on reform. Ahead of their meeting, a senior German official said Berlin was prepared to look at the “certain margin” on loans to Greece or those to Ireland through the euro zone rescue fund, EFSF.

“We can look at this if countries at the same time would be willing to accept a kind of national fiscal framework to be enshrined in their constitution, yes,” said Jörg Asmussen, senior official in the finance ministry.

lightspeed

what precisely does that mean though? whilst they may be willing to reegotiate the rate to some degree what are they expecting in return? Are they hinting at ireland altering its competitive corporation tax as the french prime minister Sarkozy has said previous. i heard on newstalk that sarkozy said taht if ireland wants to renogotiate the rate of the IMF loan it would have to be willing to increase the corporation tax. Whilst it probaly would not be wise to increase the corporation tax at the moment given that we are trying to attract investors and it acts as a competitive advantage for ireland in taht sense as far as im aware it is quite low in comparison to other EU countries. Any idea where we rank in the EU as regard to the corporation tax?

later12

lightspeed wrote: »

what precisely does that mean though? whilst they may be willing to reegotiate the rate to some degree what are they expecting in return? Are they hinting at ireland altering its competitive corporation tax as the french prime minister Sarkozy has said previous.

I have no idea, but there was no speculation of it in that article. The only speculation was that they would expect a limit to how much Ireland (and other countries, presumably) may borrow as a proportion of its GDP. That, generally, would be a wise idea even without any interest rate negotiation.

as far as im aware it is quite low in comparison to other EU countries. Any idea where we rank in the EU as regard to the corporation tax?

I don't recall exactly but we are not the lowest in Europe either in terms of the nominal nor the effective rate of CT. If it came to increasing the CT rate we would, I would guess, be better off keeping the interest rate on the basis that since it is the EFSF rate that is in question, any change to the interest rate currently payable would not be particularly impressive and we would be likely to be net better off with our CT rates.

At the end of the day, Ireland will be the one deciding its own CT rate bar us actually handing that decision making process to the Eurozone or the EU, and that is pretty much that.

Scofflaw

lightspeed wrote: »

what precisely does that mean though? whilst they may be willing to reegotiate the rate to some degree what are they expecting in return? Are they hinting at ireland altering its competitive corporation tax as the french prime minister Sarkozy has said previous. i heard on newstalk that sarkozy said taht if ireland wants to renogotiate the rate of the IMF loan it would have to be willing to increase the corporation tax. Whilst it probaly would not be wise to increase the corporation tax at the moment given that we are trying to attract investors and it acts as a competitive advantage for ireland in taht sense as far as im aware it is quite low in comparison to other EU countries. Any idea where we rank in the EU as regard to the corporation tax?

Second on statutory rate (the 12.5%), fourth on effective rate (the amount actually charged on average, which was 15.6% in 2007).

Sarkozy might like us to change our tax rate, but it's more important what the Germans think, and they're not backing him. The Germans seem more interested in a mechanism that prevents excessive deficits being put in place at the national level.

cordially,
Scofflaw

maninasia

later10 wrote: »

Not quite. By that definition, a rate of 8.5% would be 'benevolent'.

The Eurozone constituent members must realise that in accepting the need to shoulder bank debt, the Irish taxpayer is playing a significant role in amerliorating the perception of the stability of the Euro and of the Union. Yes it is to our benefit, but the rest of the eurozone is sharing in the benefit as well. They are not just acting altruistically here, and while the importance of that fact is often exaggerated, that nevertheless deserves to be acknowledged.


In agreeing to giving up greater fiscal independence and in transferring a greater budgetary role to Europe, we are aiding the stability of the Eurozone, and in return could realistically expect a lower rate of interest payable on our debt.

It is quite incorrect to suggest that the only bargaining chip is the threat of default, that is not a bargaining chip at all since such an act would be calamitous for everybody concerned.

A good negotiator never let's on that they wouldn't consider the nuclear option. The Irish government and Irish people are not good negotiators and maybe don't have the balls, instead we meekly took on a big pile of debt a 100% on Irish taxpayers shoulders.

Scofflaw

maninasia wrote: »

A good negotiator never let's on that they wouldn't consider the nuclear option. The Irish government and Irish people are not good negotiators and maybe don't have the balls, instead we meekly took on a big pile of debt a 100% on Irish taxpayers shoulders.

Taking on the bank debt was decided in 2008 with the guarantee, and is not the result of the bailout negotiations, which came two and a half years later after it became clear we were not able to sustain the level of bank debt our government landed us with.

cordially,
Scofflaw

Sand

maninasia wrote: »

A good negotiator never let's on that they wouldn't consider the nuclear option.

Couldnt agree more. The Irish negotiation team effectively reassured the ECB/EU that the only event that concerned them at all with regards to Ireland (a disorderly/unilateral default that might negatively impact Portgual/Spain) was completely off the table before negotiations even began. But then the negotiating team was brought to us by the same clowns who blindly guaranteed a banking system more than 12 times the size of the Irish states revenue. And then NAMA. And then the Croke Park Agreement.

maninasia

Scofflaw wrote: »

Taking on the bank debt was decided in 2008 with the guarantee, and is not the result of the bailout negotiations, which came two and a half years later after it became clear we were not able to sustain the level of bank debt our government landed us with.

cordially,
Scofflaw

The banking guarantee was extended, at least twice I believe. The final extension was in September 2010, just before the events of October and by which time the government was stuck with carrying the can and many original bondholders had exited. The nation sleptwalked through the whole thing all hoping for the best and not really understanding nor making an effort to understand. Everything is about putting it on the long finger and sure as long as we are okay...read public workers, pensioners, social welfare why not guarantee it....borrow borrow borrow.

Scofflaw

maninasia wrote: »

The banking guarantee was extended, at least twice I believe. The final extension was in September 2010, just before the events of October and by which time the government was stuck with carrying the can and many original bondholders had exited. The nation sleptwalked through the whole thing all hoping for the best and not really understanding nor making an effort to understand. Everything is about putting it on the long finger and sure as long as we are okay...read public workers, pensioners, social welfare why not guarantee it....borrow borrow borrow.

True, but it's still wrong to suggest that the reason we're carrying the bank debt is as a result of the bailout negotiations, when on the contrary the bailout negotiations are the result of the government deciding to carry the bank debt.

Maybe I'm taking you up wrong, but you seemed to me to be saying that if the Irish government had "had balls" in the negotiations they would have refused to carry the bank debt - but that was never a position the Irish government would have adopted, because it had already decided to carry the bank debt, and went into the negotiations on that basis. Threatening to refuse to do something it had already chosen to do of its own free will, and was already doing, isn't a negotiating position - the people on the other side of the table would quite rightly say that nobody asked the Irish government to do it in the first place, and that if they backed out of it now, they'd be the biggest losers.

If you want to consider it that option as a hand grenade, the important thing to remember is that we're holding it, while everybody else is standing some distance away.

cordially,
Scofflaw

gigino

The thread title is : Could we borrow from china instead of the IMF ?

Arguably a lot of the reason we are in this economic mess is because of all the money our Irish banks borrowed during the tiger years. Where did a lot of this money not originate from but China ? Remember David McWilliams documentary on the TV some time ago, where he actually flew specially to China + reported to us from there that thats where a lot of the money we borrowed during the boom originated from ( perhaps through other European banks too ). It was the Chinese peasants who earned 3 dollars a day + who lent one dollar of that to Ireland etc. Our banks borrowing a fortune and our government borrowing 20 billion a year to fund our government expenditure is not sustainable. That was what the programme was all about, I seem to remember.

Sand

@Scofflaw

Maybe I'm taking you up wrong, but you seemed to me to be saying that if the Irish government had "had balls" in the negotiations they would have refused to carry the bank debt - but that was never a position the Irish government would have adopted, because it had already decided to carry the bank debt, and went into the negotiations on that basis. Threatening to refuse to do something it had already chosen to do of its own free will, and was already doing, isn't a negotiating position - the people on the other side of the table would quite rightly say that nobody asked the Irish government to do it in the first place, and that if they backed out of it now, they'd be the biggest losers.

If you want to consider it that option as a hand grenade, the important thing to remember is that we're holding it, while everybody else is standing some distance away.

Out of curiousity Scofflaw, why do you think the ECB/EU/IMF came to Dublin? Because Ireland is so loved by all in Europe? Solidarity?

later12

maninasia wrote: »

A good negotiator never let's on that they wouldn't consider the nuclear option. The Irish government and Irish people are not good negotiators and maybe don't have the balls, instead we meekly took on a big pile of debt a 100% on Irish taxpayers shoulders.

I wouldn't say the decision to take on a big pile of debt was meek, I think it was unrelentingly self confident, an audacity of Shakespearean proportions, perhaps. The last vestige of the Celtic Tiger perhaps, or the last sting of a dying wasp as one particularly prominent former Tánaiste might have put it.

As Scofflaw said, the EU-IMF negotiation was not about Ireland shouldering its banking debt, it was largely a consequence of that. The decision was out own, we took on the debt long before the IMF came to town.

Duke Leonal Felmet

Yeah, but it could be worse because...

http://en.wikipedia.org/wiki/Currency_risk

Scofflaw

Sand wrote: »

@Scofflaw


Out of curiousity Scofflaw, why do you think the ECB/EU/IMF came to Dublin? Because Ireland is so loved by all in Europe? Solidarity?

Mutual need, surely?

I've expressed it at greater length elsewhere - the other European countries wanted Ireland out of the picture, because while our government apparently believed we'd be able to pull off paying for the deficit and bank debt - which is not actually an inherently ridiculous idea - nobody else did, and the uncertainty over whether we were going to blow up, default, get bailed out, whatever, was giving the markets the jitters, which was affecting everybody else.

Same basic reasoning as the Greek bailout.

cordially,
Scofflaw

View

lightspeed wrote: »

I was listening to Al Jazerra English and they were discussing china and although some commentators mad the point about how china was trying to build up allies across the world to further spread their dominance across the world it also mentioned that in the past 2 years China has lent out more money than the ECB and another factor why china is eager to lent money out might be that its bought up so much of the US dollar that as the dollar declines in value they are losing over $200 billion a year. So would china have been or could they be willing to lend the money instead of the IMF that ireland so desperately needs at a better interest rate?

The obvious question would appear to be why would China be interested in undercutting the IMF by charging less for its money? Presumably, they'd earn more be loaning it out at rates higher than the IMF charge - there is no shortage of countries queuing up for loans at the moment, after all.

Sand

Scofflaw wrote: »

Mutual need, surely?

I've expressed it at greater length elsewhere - the other European countries wanted Ireland out of the picture, because while our government apparently believed we'd be able to pull off paying for the deficit and bank debt - which is not actually an inherently ridiculous idea - nobody else did, and the uncertainty over whether we were going to blow up, default, get bailed out, whatever, was giving the markets the jitters, which was affecting everybody else.

Same basic reasoning as the Greek bailout.

cordially,
Scofflaw

What mutual need? Everyone else is standing very far away whilst were the ones holding the hand grenade, right? That would imply they wouldnt be too bothered if we were silly enough to not continue down the debt-spiral we are in. If Ireland cut the bank creditors loose, would it have had any serious impact on the EU/ECB given Ireland is so small and so far away? Would Portugal and Spain have been affected?

The idea that theyd have been indifferent to an Irish default and its implications isnt realistic - if such was the case, why were they in Dublin at all? The point Im getting to is that Ireland did have a negotiating position. The ECB/EU didnt come over here because they were so fond of us - it was because they were worried about what could happen to Portugal and Spain, and by extension the rest of the European banks. They brought matters to a head by leaking rumours to the papers. They came to us looking to make a deal that would get them what they wanted. We unfortunately sent in a team that was also entirely focused on getting a deal that would get the ECB/EU what they wanted. Its unclear who was supposed to be representing the Irish interests - perhaps the IMF but it seems they were overruled.

An expressed Irish resignation to the regrettable necessity of revoking the guarantee (with a simultaneous burning of the banks creditors) would have to be taken realistically. Whats the worst that could happen Ireland? What could they threaten us with?
The markets wouldnt lend to us? We were and remain locked out of the markets anyway and we arent going back in any time soon. That horse has well and truly bolted.
A bank run? Theres a bank run in action as we speak: 25 billion euro has left the Irish banks in the past few months.
Withdrawal of ECB support to the banking system? The ECB has withdrawn support - the Irish banks are being propped up by the Dublin CB effectively printing money plus this credit card we've been given to well and truly hang ourselves with.

On the other hand, if the markets were getting jittery about watching Ireland fool about in 2010 it implies they wouldnt be indifferent to Ireland revoking its guarantee. Investors would have to figure out who owed what to whom and what they had lost in their Irish investments. Spain/Portgual and the other nations would have taken a hit as investors fled the periphery, presenting a serious issue for the ECB/EU to deal with. As it is no one can agree on what Germany's exposure to Ireland is. The EU/ECB had more at risk than we did.

Ireland did have a negotiating position, and a sufficiently strong team could have used it to get a better deal than what was effectively a credit card to solve a liquidity problem.

Scofflaw

Sand wrote: »

What mutual need? Everyone else is standing very far away whilst were the ones holding the hand grenade, right? That would imply they wouldnt be too bothered if we were silly enough to not continue down the debt-spiral we are in. If Ireland cut the bank creditors loose, would it have had any serious impact on the EU/ECB given Ireland is so small and so far away? Would Portugal and Spain have been affected?

If the EU/ECB were seen to accept that Ireland could default, then it would impact every country in Europe, because if Ireland can do it and remain in good standing, everyone can do it. The only way Ireland could be seen to default is alone.

Sand wrote: »

The idea that theyd have been indifferent to an Irish default and its implications isnt realistic - if such was the case, why were they in Dublin at all? The point Im getting to is that Ireland did have a negotiating position. The ECB/EU didnt come over here because they were so fond of us - it was because they were worried about what could happen to Portugal and Spain, and by extension the rest of the European banks. They brought matters to a head by leaking rumours to the papers.

For the record, Merkel was asked by the ECB not to discuss burning the bondholders in public - she did so off her own bat.

Sand wrote: »

They came to us looking to make a deal that would get them what they wanted. We unfortunately sent in a team that was also entirely focused on getting a deal that would get the ECB/EU what they wanted. Its unclear who was supposed to be representing the Irish interests - perhaps the IMF but it seems they were overruled.

An expressed Irish resignation to the regrettable necessity of revoking the guarantee (with a simultaneous burning of the banks creditors) would have to be taken realistically. Whats the worst that could happen Ireland? What could they threaten us with?
The markets wouldnt lend to us? We were and remain locked out of the markets anyway and we arent going back in any time soon. That horse has well and truly bolted.

True.

Sand wrote: »

A bank run? Theres a bank run in action as we speak: 25 billion euro has left the Irish banks in the past few months.

Not so true - there's a big difference between a bank run and a steady attrition of large deposits.

Sand wrote: »

Withdrawal of ECB support to the banking system? The ECB has withdrawn support - the Irish banks are being propped up by the Dublin CB effectively printing money plus this credit card we've been given to well and truly hang ourselves with.

Even less true - the ECB still holds about €100bn+ of Irish bank debt, the ICB only €50bn or so.

Sand wrote: »

On the other hand, if the markets were getting jittery about watching Ireland fool about in 2010 it implies they wouldnt be indifferent to Ireland revoking its guarantee. Investors would have to figure out who owed what to whom and what they had lost in their Irish investments. Spain/Portgual and the other nations would have taken a hit as investors fled the periphery, presenting a serious issue for the ECB/EU to deal with. As it is no one can agree on what Germany's exposure to Ireland is. The EU/ECB had more at risk than we did.

Ireland did have a negotiating position, and a sufficiently strong team could have used it to get a better deal than what was effectively a credit card to solve a liquidity problem.

The problem with invoking the hand grenade option of an Irish default on bank debt is that that's then it from the point of view of the EU/ECB - there's no reason to give Ireland a bailout. And without a bailout, and locked out of the bond markets for the same period as Iceland after their bank default, we would be an awful lot more hurt than the rest of the eurozone.

That's the problem with the nuclear option - it's not mutually assured destruction unless you're the same size as your opponent, and we're not. We're North Korea, not the USSR - if we go for a nuclear exchange with the US, there will certainly be a lot of dead Americans, but North Korea will be glass.

Having said all that, the current arrangements are at the limits of what Ireland can do, and I think that's something that's recognised. Unfortunately, persuading the German and French public to go easy on us is going to be a hard sell.

cordially,
Scofflaw

maninasia

Scofflaw wrote: »

True, but it's still wrong to suggest that the reason we're carrying the bank debt is as a result of the bailout negotiations, when on the contrary the bailout negotiations are the result of the government deciding to carry the bank debt.

Maybe I'm taking you up wrong, but you seemed to me to be saying that if the Irish government had "had balls" in the negotiations they would have refused to carry the bank debt - but that was never a position the Irish government would have adopted, because it had already decided to carry the bank debt, and went into the negotiations on that basis. Threatening to refuse to do something it had already chosen to do of its own free will, and was already doing, isn't a negotiating position - the people on the other side of the table would quite rightly say that nobody asked the Irish government to do it in the first place, and that if they backed out of it now, they'd be the biggest losers.

If you want to consider it that option as a hand grenade, the important thing to remember is that we're holding it, while everybody else is standing some distance away.

cordially,
Scofflaw

If I negotiated in my job like that I doubt I would last long. You always keep a walk away option, even if you didn't like the government which was never going to face the music that it created, you must make sure the opposing side knows this option is on the table. The ECB/IMF bailout was all about making sure Ireland pays it debts in their entirety by whatever means neccessary.
You ignore the fact as to why the ECB was so nervous about Ireland (and still is), if Ireland defaults major banks in Germany/France/UK would be in trouble and the whole Eurozone would be in serious jeopardy with a 'European Sovereign Crisis' rolling through nation by nation. Very poor negotiators and they shouldn't have been leading the negotiations as they were compromised and proven to be incompetent.

Scofflaw..the idea that Ireland could default on it's own doesn't hold water.


In negotiating bluff is at least half of the game. Even if you are not willing to push the nuclear weapon in reality you must look like you are willing to..it will have the same effect. Frankly I think the FF govt did not how to truly negotiate through their long history of 'social partnership' and buying votes.

Even if it did default was that the worst option? The government that made this decision is now out of power!

Scofflaw

maninasia wrote: »

If I negotiated in my job like that I doubt I would last long. You always keep a walk away option, even if you didn't like the government which was never going to face the music that it created, you must make sure the opposing side knows this option is on the table. The ECB/IMF bailout was all about making sure Ireland pays it debts in their entirety by whatever means neccessary.
You ignore the fact as to why the ECB was so nervous about Ireland (and still is), if Ireland defaults major banks in Germany/France/UK would be in trouble and the whole Eurozone would be in serious jeopardy with a 'European Sovereign Crisis' rolling through nation by nation. Very poor negotiators and they shouldn't have been leading the negotiations as they were compromised and proven to be incompetent.

Scofflaw..the idea that Ireland could default on it's own doesn't hold water.

In negotiating bluff is at least half of the game. Even if you are not willing to push the nuclear weapon in reality you must look like you are willing to..it will have the same effect. Frankly I think the FF govt did not how to truly negotiate through their long history of 'social partnership' and buying votes.

Even if it did default was that the worst option? The government that made this decision is now out of power!

Once again, a completely inaccurate set of figures have been rolled out in support of the idea that the EU couldn't afford Ireland defaulting. Those figures in the picture are from the Basel locational statistics, and they are completely meaningless in determining the costs of an Irish default.

Basel figures only show what banks in one country own in banks in another country, including all moneys in a foreign subsidiary. That means the figures for "owed by Irish banks to German banks" includes the money in every German bank subsidiary in the IFSC, and has nothing to do with how much money is owed by the Irish state-guaranteed banks (Anglo, AIB etc) to German banks. Bundesbank have described claims of huge exposure to Irish debt as 'defamatory':

Chancellor Angela Merkel's spokesman Steffen Seibert said in Berlin earlier this week that Deutsche Bank was especially exposed to Ireland as he tried to explain to German voters why they will be paying for Ireland's bailout.

The comment provoked Deutsche Bank spokesman Christian Streckert to describe the statement as "defamatory" and insist that the bank was owed less than ?400m by Irish banks.

Other big banks, including Commerzbank, BayernLB and WestLB, have also called their exposure to Ireland relatively minor.

The government later issued a statement admitting it does not have have any "reliable figures" about the scale of Germany's exposure to Ireland.

Figures from the Bank for International Settlements in Basel, often quoted in the Irish media, suggest Irish banks and companies owed $139bn (?104bn) to German banks in June and a further $132bn to British banks at the end of June.

While these figures come from one of the world's most respected financial regulators, they differ starkly from the figures issued by individual banks.

One reason is that it is often difficult to calculate these risks. The ?400m figure quoted by Deutsche Bank included derivatives to hedge risk, according to bank spokesman Ronald Weichert.

The bank has not disclosed the gross figure. The lender said in a July presentation that it had ?309m in gross exposure to central and local governments in Ireland at the end of March.

Bundesbank president Axel Weber said on Monday that estimates for bank exposure to Ireland were "exaggerated".

Mr Weber, who is tipped to become the next head of the European Central Bank, said much of the German banks' exposure to Ireland involved companies in the International Financial Services Centre that were Irish subsidiaries of German banks.

Mr Weber believes the real exposure of German banks is closer to ?30bn.

Disagreement

Even within Deutsche Bank, there appears to be disagreement over the extent of the problems.

Board member Juergen Fitschen said last week that he couldn't rule out losses for investors in Irish debt.

"You can't rule out anything and if it happens, it wouldn't be the end of the world," he said in an interview with German television station Deutsches Anleger Fernsehen.

"But I'm not saying that it will come to that. It would be nicer if they manage to avoid it."

He said that Germany's biggest bank was not concerned about potential writedowns on Irish investments.

Investors who sought high returns by buying Irish debt shouldn't act like they weren't aware of the risk, he added.

The same goes for UK banks and French banks - most of the money 'owed' to UK banks is actually in Royal Bank of Scotland (Ireland) and Bank of Scotland/Halifax (Ireland). It's not owed by Irish state-guaranteed banks.

What that means is that an Irish default on bank debt is not the nuclear option people think it is. As the Bundesbank guy said "it would be nicer if they manage to avoid it" but "if it happens, it wouldn't be the end of the world". That's not a description of a nuclear option - and that's supposed to have been the best card in Ireland's hand.

To be blunt, yes, Europe could afford an Irish default - but only a unilateral one, not one they were seen to agree to.

cordially,
Scofflaw

maninasia

Yes I think we all know they could afford an Irish default, it's the unknown effects afterwards and whether other countries would default that could bring down the Euro. That's what they are afraid of. Anyway, if they can afford a default and even German bankers saying bondholders should take a hit then the government should have made them take the hit at the start or at least not have continued with the blanket guarantee for 2 years.

Scofflaw

maninasia wrote: »

Yes I think we all know they could afford an Irish default, it's the unknown effects afterwards and whether other countries would default that could bring down the Euro. That's what they are afraid of.

Indeed, which is why there's such a difference between a unilateral Irish bank default and an agreed Irish bank default. The former implies far less of a contagion risk than the latter.

Unfortunately, because the latter (an agreed bank default) is much costlier to everyone else than the former, you cannot use the threat of the former to try to achieve the latter. You're essentially saying "if you don't all agree to be dragged down this pit as well as me, I will throw myself down it alone" - and that's not a useful threat.

It's a threat that's even less useful than that, though, because the government have never shown anything other than a dogged determination to protect the senior bank bondholders. So the threat you believe the Irish government should have used is "if you don't all agree to be dragged down this pit as well as me, I will throw myself down it alone, even though I have never shown the slightest inclination to do so, and have instead arranged matters as far as possible so that it is impossible for me to do so".

maninasia wrote: »

Anyway, if they can afford a default and even German bankers saying bondholders should take a hit then the government should have made them take the hit at the start or at least not have continued with the blanket guarantee for 2 years.

Yes - but the government didn't want to do that. None of the voices saying that the bondholders should take a hit have come from inside the Irish government at any point - the German banks have said it, the German Chancellor has said it, the Irish government has never said it.

Essentially, the other European countries have been forced by the guarantee into a position where they cannot now agree to such a default, because it has been made an issue of credibility for the entire eurozone. A default by Ireland now would imply that the eurozone cannot look after its own, and that the whole system is shaky - unless such a default is seen to be unilateral, and more or less in defiance of what the other eurozone countries would do in similar circumstances. And still we have to face the fact that for whatever reason, burning the senior bondholders is not something the Irish government wants to do or has ever intended doing.

If the Irish government had acted differently in 2008, things would be different, and we would be lying in a different bed. They didn't, though. Instead, for reasons best known to themselves, they guaranteed the debts of the whole Irish banking sector, including the ones that their own experts recommended they didn't guarantee, and having done so, effectively made their stance on the issue everybody's stance.

cordially,
Scofflaw

Sand

@Scofflaw

If the EU/ECB were seen to accept that Ireland could default, then it would impact every country in Europe, because if Ireland can do it and remain in good standing, everyone can do it. The only way Ireland could be seen to default is alone.

The acceptance or otherwise of the ECB is irrelevant. They cant stop us not honouring the guarantee. We would not remain in good standing post a unilateral revoking of the guarantee, but then we are not in good standing anyway. Again, that horse has bolted.

For the record, Merkel was asked by the ECB not to discuss burning the bondholders in public - she did so off her own bat.

I wasnt referring to Merkel - I think her comments were effectively irrelevant in the Irish case. I was referring to the ECB signalling heavily and publically that they were no longer willing to support the Irish banks. That was the ECBs interest - the Irish banks were taking advantage of the ECBs setup (which never envisaged this situation) and the ECB wanted to be taken off the hook. They couldnt afford to arbitrarily cut the Irish banks off without severely impacting the wider EU system of banks. It needed the Irish to agree to take up the slack to maintain appearances.

This is the key point: The ECB wanted a deal. A half decent Irish negotiating team could have emerged with a deal that suited Irish interests rather than simply making them worse.

Not so true - there's a big difference between a bank run and a steady attrition of large deposits.

25 billion in a few months is not a steady attrition of deposits in a banking system like Irelands. Call it what you will, but theres a silent bank run in motion. With internet banking the only difference is the queues are forming at peoples computers.

Even less true - the ECB still holds about €100bn+ of Irish bank debt, the ICB only €50bn or so.

And the ICBs 50 billion started ramping up as the ECBs cut off the flow of support. The ICB has taken over where the ECB has stopped. The ECB has removed its support - that was the entire purpose of its visit to Dublin: To get itself off the hook and to force the Irish state to take a credit card to use to support the Irish banks.

The Irish team had a strong position even without the implication of cutting the banks loose: They could have simply said "No, we dont want the credit card. We're happy with things the way they are. Lets continue" and force the ECB to come back with a better deal.

The problem with invoking the hand grenade option of an Irish default on bank debt is that that's then it from the point of view of the EU/ECB - there's no reason to give Ireland a bailout. And without a bailout, and locked out of the bond markets for the same period as Iceland after their bank default, we would be an awful lot more hurt than the rest of the eurozone.

Without the bank debt, Ireland doesnt need a bailout. Once thats resolved and the markets are reassured that Ireland can manage its remaining debt we will be in a better position. The "bailout" we got didnt do anything to resolve the bank debts, nothing to reassure the markets and did nothing to improve our position - indeed, its much worse as the ECB has withdrawn support and its all on Ireland now and our friends in the EU have us over a barrel and are threatening to remove our only economic strength: our favourable CT regime.

That's the problem with the nuclear option - it's not mutually assured destruction unless you're the same size as your opponent, and we're not. We're North Korea, not the USSR - if we go for a nuclear exchange with the US, there will certainly be a lot of dead Americans, but North Korea will be glass.

I think youre missing the game theory here: Everything has gone already. We are locked out of the bond markets. The rest of the EU, including the periphery isnt.

And the ECB/EU decision wont hinge on a comparison of costs to Ireland vs. EU/ECB anyway, it will hinge on the costs of doing a real deal with Ireland vs. the costs to the EU/ECB of a messy unilateral Irish default. If the cost of a real Irish bailout to the EU/ECB was less than the costs of a messy Irish default to the EU/ECB theyd do a deal: Ireland is 1% of EU economic activity. Theyd be ranting and raving about dire threats and so on, but theyd do a deal.

The international community, including the US, has struck a number of deal with North Korea because even if North Korea would lose a nuclear war the cost of doing a deal with North Korea is a lot less than the cost of winning a nuclear exchange.

Having said all that, the current arrangements are at the limits of what Ireland can do, and I think that's something that's recognised. Unfortunately, persuading the German and French public to go easy on us is going to be a hard sell.

Persuading the German/French public to go easy on us? Look: I think the Sept 2008 decision was a ludicrously bad idea, as is NAMA, and indeed the entire Irish banking policy. And I think it was entirely self inflicted by stupid Irish politicians and civil servants. I think attempts to blame the EU/ECB for either is short sighted: Its not their fault we are so inept, they are simply looking out for themselves.

But we need to actually start standing up for ourselves. The German/French public couldnt care less about Ireland - are we hoping that theyll suddenly take to the streets demanding better terms for Ireland? That they'll suddenly organise and take on the ECB/EU on our behalf? The people who care ought to be the Irish government and the Irish people and we *do* have choices. We have absolutely no chance in any negotiations if psychologically we are already waving the white flag and just hoping for honourable terms of occupation.

Scofflaw

But everything is not "gone already". We are not actually locked out of the bond markets - we're just seeing rates that are as high as our rates before we joined the euro. We are not in poor standing with Europe - the EU goes out of its way to say how well we're doing, and how great our austerity programme is. We haven't had a run on the banks, because a run on the banks is where banks have to close their doors because they cannot meet the outflow of deposits.

The ECB wanted Irish bank debt off their books - sure, but the ECB isn't required to have Irish bank debt on their books. They don't have to intervene on the market in Ireland's favour either. So, Ireland saying "no, we like the situation as it is, let's continue" is meaningless, because Ireland isn't in a position to make that happen. It's like a teenager saying to the parents "no, I don't like this allowance deal, you'll have to come up with a better one". There's no credible threat.

And the really essential point here - the government is not going to revoke the guarantee. They're not interested in burning the senior bondholders, and they've made that clear all along. I'm not sure why you keep insisting that the government could have "held out" to do something they so very clearly don't want to do in the first place. They're about to pay out on €750m of Anglo bonds maturing Monday - unsecured senior debt not even covered by the guarantee:

On Monday, January 31st, Anglo Irish Bank are going to pay out on a maturing bond worth €750 million. (For reference, the total cut in this year’s welfare budget will be €873 million.) The investors who purchased this bond invested their money with Anglo on the 17th of January 2006. The bond is senior unsecured debt and is not covered by a state guarantee.

Who is on the other end of that bond?

Persuading the German/French public to go easy on us? Look: I think the Sept 2008 decision was a ludicrously bad idea, as is NAMA, and indeed the entire Irish banking policy. And I think it was entirely self inflicted by stupid Irish politicians and civil servants. I think attempts to blame the EU/ECB for either is short sighted: Its not their fault we are so inept, they are simply looking out for themselves.

But we need to actually start standing up for ourselves. The German/French public couldnt care less about Ireland - are we hoping that theyll suddenly take to the streets demanding better terms for Ireland? That they'll suddenly organise and take on the ECB/EU on our behalf? The people who care ought to be the Irish government and the Irish people and we *do* have choices. We have absolutely no chance in any negotiations if psychologically we are already waving the white flag and just hoping for honourable terms of occupation.

The German and French public do care about Ireland, though, but unfortunately not in the way you appear to think I meant - they think we're a bunch of shysters, and people like Merkel are having a lot of difficulty trying to persuade them that bailing out Ireland isn't throwing bad money after bad. Sarkozy, of course, just plays to the crowd - his comments about Irish tax aren't for Irish consumption, they're for the home market.

I appreciate what you're saying, though - it seems as if the government didn't fully play the cards they had. And Biffo, to give him his due, isn't some kind of novice negotiator - whether one likes or dislikes the ill-fated EU Constitution, Biffo was given the six months of the Irish Presidency to pull it off, after it had spent years mired in negotiation, and managed it.

Needs further thought - something isn't quite right here. And yes, I appreciate that's an under-statement!

cordially,
Scofflaw

ei.sdraob

Scofflaw wrote: »

We haven't had a run on the banks

really?

Scofflaw wrote: »

because a run on the banks is where banks have to close their doors because they cannot meet the outflow of deposits.

trying to change the definition of a bank run? why

A bank run (also known as a run on the bank) occurs when a large number of bank customers withdraw their deposits because they believe the bank is, or might become, insolvent.

later12

Scofflaw wrote: »

But everything is not "gone already". We are not actually locked out of the bond markets - we're just seeing rates that are as high as our rates before we joined the euro.

On the bond market? While I agree with most of your post, we did not see a sustained yield above 9% pre Euro; we last saw these rates in 1995 and they had been falling since and never went higher than 6% until 2010.

http://www.tradingeconomics.com/Economics/Government-Bond-Yield.aspx?symbol=IEP

I admit my point is largely irrelevant, but we are effectively locked out of the bond market, although one can rarely be literally locked out, of course. Best example of the latter would be Argentina, an example which I fear too many people would suggest that we follow. <br>

Duke Leonal Felmet

ei.sdraob wrote: »

trying to change the definition of a bank run?

Both his and the definition that you copied & pasted are the same, it requires a nuanced knowledge of economics to tell. Let me show you.

'because a run on the banks is where banks have to close their doors because they cannot meet the outflow of deposits.'

What is important here is that the bank cannot meet the outflow. What is also important is that this is a liquidity issue, and does not imply insolvency, like you probably incorrectly suspect. If that (a bank not being able to meet it's cash outflow requirements) is not a necessary condition for a bank run then every day is a run on a bank, as people withdraw deposits every day. What is important is liquidity ratios, which I explain below. Understand so far?

Ok, now we have your copied statement:

A bank run (also known as a run on the bank) occurs when a large number of bank customers withdraw their deposits because they believe the bank is, or might become, insolvent.

Which is the same thing that scofflaw said, so long as you understand the mechanics of a bank run (these things can't be summed up in a neat sentence, in general, you need to have read the chapters and chapters that lay behind them), the point of that fairly poorly worded statement that you found is that a 'large number' is actually an unexpected number, or more specifically, a number larger than the banks deposit ratio. This will lead to the bank not being able to meet its cash outflow requirements, which is where scofflaws statement comes in. Again, this does not imply insolvency, but is a liquidity crisis. I'm sure you can Google around and find many examples where liquidity crises led to insolvency, but this does not change the definition of what a bank run is. Bank runs are about liquidity ratios, insolvency is about capital ratios. One crisis can lead to the other, but a crisis in one does not imply a crisis in another. Understand? Good.

So, they are both describing the same thing, but like I said, unless you have the necessary knowledge to understand the full mechanics of banks and their inner workings, you are unlikely to notice such nuances.

Scofflaw

later10 wrote: »

On the bond market? While I agree with most of your post, we did not see a sustained yield above 9% pre Euro; we last saw these rates in 1995 and they had been falling since and never went higher than 6% until 2010.

http://www.tradingeconomics.com/Economics/Government-Bond-Yield.aspx?symbol=IEP

If you look at the long run there from 1991-2011, you can see that rates were sustained over 9% back in 1991-1993, hitting a high point of 10.47%. They fell with ERM convergence in preparation for euro entry, and have been very low by historical standards over the last decade.

later10 wrote: »

I admit my point is largely irrelevant, but we are effectively locked out of the bond market, although one can rarely be literally locked out, of course. Best example of the latter would be Argentina, an example which I fear too many people would suggest that we follow. <br>

Or Iceland, which hasn't been able to issue non-domestic bonds for four and a half years now.

cordially,
Scofflaw

karlth

Scofflaw wrote: »

Or Iceland, which hasn't been able to issue non-domestic bonds for four and a half years now.

2.5 years and because of capital controls.

Duke Leonal Felmet

karlth wrote: »

2.5 years and because of capital controls.

Could you expand on the latter?

karlth

Duke Leonal Felmet wrote: »

Could you expand on the latter?

In the aftermath of the 2008 banking crisis the Icelandic currency fell so sharply that the Central Bank issued capital controls, i.e. the Krona was removed from the currency market and restrictions on currency trading were put into effect.

Currently the Icelandic government funds itself purely with domestic bonds as domestic buyers are not allowed to buy foreign bonds.

Capital controls are being eased off slowly but they'll probably be in effect for 1-2 years more.

maninasia

Things would play out differently in Ireland, if we could drop the value of our currency we woud become very competitive, our export and service industry would boom, tourism would take off too. Iceland didn't have that effect because it doesn't have much in the way of a manufacturing or service sector

Duke Leonal Felmet

maninasia wrote: »

Things would play out differently in Ireland, if we could drop the value of our currency we woud become very competitive, our export and service industry would boom, tourism would take off too. Iceland didn't have that effect because it doesn't have much in the way of a manufacturing or service sector

You do realise that most of our debt is euro-denominated? Devaluing a new Punt would simply increase the cost of paying our debt, which is still in Euro. Do you understand? I can explain in more detail, if you like.

later12

Duke Leonal Felmet wrote: »

You do realise that most of our debt is euro-denominated? Devaluing a new Punt would simply increase the cost of paying our debt, which is still in Euro. Do you understand? I can explain in more detail, if you like.

In fairness, while i am not in any way in favour of Ireland leaving the Euro, there are ways of dealing with that and people sometimes risk being misleading on this issue, or even being misled themselves. For one thing, all of Ireland's most recent sovereign bonds were written without stipulation, which means they could be converted into punts, and steps could be taken to retain strength in the punt via the export trade and a carefully managed exchange rate.

Duke Leonal Felmet

later10 wrote: »

In fairness, while i am not in any way in favour of Ireland leaving the Euro, there are ways of dealing with that and people sometimes risk being misleading on this issue, or even being misled themselves. For one thing, all of Ireland's most recent sovereign bonds were written without stipulation, which means they could be converted into punts, and steps could be taken to retain strength in the punt via the export trade and a carefully managed exchange rate.

I am afraid I am going to have to ask you for a source on how Ireland could simply convert their debt to punts, devalue the punt and get away with it. It doesn't sound plausible, but I am open to correction. Then you say that the punt could remain strong through export trade? I find that a bit contradictory to the above premise, so perhaps you could expand on it.

Also, carefully managed exchange rate seems to imply a floating exchange rate, am I correct? Do you understand the risk this would place Ireland in as a small open economy? Try to google for Ireland's currency crisis in the mid-1950s to see what happens when small open economies like Ireland fail to follow major currency movements. Patrick Honohan wrote a nice, easy to follow paper on it.

Finally, carefully managed. Now that is naive thinking, given this nations history.

later12

Duke Leonal Felmet wrote: »

I am afraid I am going to have to ask you for a source on how Ireland could simply convert their debt to punts, devalue the punt and get away with it.

Why not? Like I said ten year paper is expressly Irish paper and is free of stipulation for the Government to 'punt' it under local law. The country is run by a sovereign Government and that would be their (in my opinion foolish) perogative. This could be an attractive option for a government that is faced with a sovereign default by default i.e. defaulting on covered piggybank debt.

The big problem with that is that it might even mean a return to the IMF due to being priced out of the bonds market. However, the benefit to Ireland would be that it would be engaging the IMF to help pay for its real sovereign debt.

you say that the punt could remain strong through export trade? I find that a bit contradictory to the above premise, so perhaps you could expand on it.

What I actually mean is that control of foreign exchange could help Ireland pay its way. One could theoretically turn exporters into currency surrogates whereby they buy forex at the higher "government" rate whereas Joe public buys his euros at the lower market rate, profiting the Government. It looks like an export tax, but it is simply a case of exporters acting as delegates, like i said. Given Ireland's strong export position, this could be a feasible argument that could be put forward as a measure to offset some dangers associated with devaluation.

Patrick Honohan wrote a nice, easy to follow paper on it.

It is quite irrelevant.

Duke Leonal Felmet

Thanks later, I have suddenly lost my appetite for discussing this matter with you.

All the best.

maninasia

Duke Leonal Felmet wrote: »

You do realise that most of our debt is euro-denominated? Devaluing a new Punt would simply increase the cost of paying our debt, which is still in Euro. Do you understand? I can explain in more detail, if you like.

Do you understand what default means? You negotiate a default package, take a hit up front, devalue and Ireland would be in good shape much quicker. Within a couple of years our unemployment rate would drop dramatically and there would be many opportunities especially for young people as companies hire. YOUR current solution, the only 'solution' is forced emigration for 5 to 10 years of the bulk of our young people!

The problem is there are certain 'protected' sections of the population dead against it because they see real risk to their jobs and income. Whichever way you break the egg it's going to hurt, but which one is a real choice.
There is a choice and a lot of people don't know that and the government seemed to promote that lin
e with it's blanket guarantee...now we know what happens when people say there is no choice.

Duke Leonal Felmet

maninasia wrote: »

Do you understand what default means?

I do, but given that your post did not contain a single mention of it, I can only presume that you are shifting the goalposts. Listen, I really have better things to do than argue in circles. If you would like to address the issue that I raised, feel free. But I don't want these playground tactics.

maninasia

No you made it out I don't have a clue but that all simply your own supposition just because I didn't lay out A, B, C for you.
Default and dropping out of Euro is a definite option.

The guys that said it wasn't an option are all going to get their pensions now...tell them thanks from all the young people of Ireland.

Duke Leonal Felmet

maninasia wrote: »

No you made it out I don't have a clue but that all simply your own supposition just because I didn't lay out A, B, C for you.
Default and dropping out of a Euro is a definite option.

So, it's our fault for not being able to read your thoughts.

Well, I can't. So if when you say that Ireland should pull out of the Euro and devalue, and what you actually mean is that Ireland should pull out of the Euro, devalue AND default. I guess you should just spell it out. A country defaulting on it's debt is kind of something that should be mentioned, and is certainly not implied in your post.

Now, it would appear that you are not in the mood for a civil discussion, so how about we leave it there?

caoty

gigino wrote: »

The thread title is : Could we borrow from china instead of the IMF ?

Arguably a lot of the reason we are in this economic mess is because of all the money our Irish banks borrowed during the tiger years. Where did a lot of this money not originate from but China ? Remember David McWilliams documentary on the TV some time ago, where he actually flew specially to China + reported to us from there that thats where a lot of the money we borrowed during the boom originated from ( perhaps through other European banks too ). It was the Chinese peasants who earned 3 dollars a day + who lent one dollar of that to Ireland etc. Our banks borrowing a fortune and our government borrowing 20 billion a year to fund our government expenditure is not sustainable. That was what the programme was all about, I seem to remember.

Can you still give the link to the program?

maninasia

There's some truth in that but it's probably more the extra money floating around from their own economic growth and the huge amounts of foreign exchange that the Chinese government has accumulated, trillions of USD.

I believe that program was a joint RTE/Australian network production, I have seen it in Asia aswell.

http://www.davidmcwilliams.ie/2010/10/27/australian-film-institute-award-nomination

A trailer...
http://www.youtube.com/watch?v=FYEX-PEYtQ0

mike65

Having been watching The Chinese Are Coming on BBC2 and listening the David McWilliams (one off) show on Newstalk yesterday were this this thread topic came up, will China buy into Ireland either through inward investment (somewhere to sink a bit of that 2.8 trillion dollars) or by buying debt? or both.

caoty

mike65 wrote: »

Having been watching The Chinese Are Coming on BBC2 and listening the David McWilliams (one off) show on Newstalk yesterday were this this thread topic came up, will China buy into Ireland either through inward investment (somewhere to sink a bit of that 2.8 trillion dollars) or by buying debt? or both.

It might be in form of buying some stakes in the Irish financial sector at first. It could also make signficant investment in the industry sector later. China would be interested in establishing some stronghold in Europe. However, the key here is what Ireland/the Irish government will offer. There is no free meal. The Chinese are not obliged to help Ireland when even Ireland's "friendly" EU big brothers are charging it a punitive interest rate and refuse to abide by the basic rule of capitalism -- investors(EU banks/institutions) bear the profit from their investment (in Irish banks/institutions) as well as the risk/potential loss.