Irelands current situation is the ECB's fault

tara73

there's obviously a strong opinion from many people here that the current economic situation the country is in is mainly the fault of the ECB.

I tried to figure out why this should be the case but it's all very confusing so I would like to know where this opinion is coming from as well as the other side who have points to say, that it's not the case.

thanks!

RichardAnd

The ECB made it possible for Irish banks to borrow wild amounts of money who would then lend relativity wild sums of cash to hundreds of thousands of paddies who had no hope of ever paying it back.

There's a circle of blame in this. We can blame banks for lending but really, no one was made to borrow.

Ireland's woes are, in my opinion at least, the culmination of decades of nepotism in the public sector and political classes, dire incompetence from the men who hold the reins, apathy and nonchalant attitudes from the great unwashed and the great unity of the Celtic Tiger; Greed.

catbear

Blaming the ECB is like blaming the rope maker when someone hangs themselves. You could ban rope but then people would still find other ways to self destruct.

Count Dooku

tara73 wrote: »

there's obviously a strong opinion from many people here that the current economic situation the country is in is mainly the fault of the ECB.

I tried to figure out why this should be the case but it's all very confusing so I would like to know where this opinion is coming from as well as the other side who have points to say, that it's not the case.

thanks!

Partly
ECB allowed to transfer excess of money from Germany and other donors to PIGS countries in order to prevent overheating of German economy. BTW, a lot of those money were earned by German banks/pension funds on speculations with derivatives and had to be reinvested into safe place. Irish banks with AAA rating at this time were looking as safe harbour
ECB was ignoring that Irish economy was based last 7 years around property bubble and around money borrowed abroad by Irish banks
ECB was trying to protect German economy without analysing of possible damages which cheap money can do for countries led by left wing populists

But it doesn't remove responsibility from Financial Regulator and Central Bank. They had enough power to protect country, but they didn't do it
This is why all CB/FR staff must fired without pension entitlements for their incompetence and pension must withdrawn from all staff retired last 7 years including Pat Neary

tara73

RichardAnd wrote: »

The ECB made it possible for Irish banks to borrow wild amounts of money who would then lend relativity wild sums of cash to hundreds of thousands of paddies who had no hope of ever paying it back.

here lies one important point to my question: did the irish banks had better conditions from the ecb to borrow money than for example finland, italy, france, germany? if not, then why didn't all other eu countries stepped in and borrowed this wild amounts of money??

tara73

Count Dooku wrote: »

Partly
ECB allowed to transfer excess of money from Germany and other donors to PIGS countries in order to prevent overheating of German economy.

that's completely new to me and never heard it before. could you elaborate further or give a link to back it up?
the german economy had a short upturn after the wall fell but from 1995 the downturn began and there was a stagnation period of more than 10 years, it was just in 2007 when the economy started to grow again. so where did the fear of overheating should come from?

irishh_bob

tara73 wrote: »

that's completely new to me and never heard it before. could you elaborate further or give a link to back it up?
the german economy had a short upturn after the wall fell but from 1995 the downturn began and there was a stagnation period of more than 10 years, it was just in 2007 when the economy started to grow again. so where did the fear of overheating should come from?

not sure about any danger of the german economy over heating but for ten years , the only borrowers germans banks had were irish banks as the german economy was moribund for a decade , i have no doubt that the finance ministers in germany and france were putting serious pressure on brian lennehan to save german and french money ( bondholders ) on the night of the sept the 30th 2008 , the big lie doing the rounds right now is that germany is having to cough up to save little ireland , the reality is that little ireland took a bullett for germany nearly three years ago and has been bleeding ever since , if thier isnt a change in policy some time soon , the corpse that is the irish economy will start to spread disease further afield

Count Dooku

tara73 wrote: »

that's completely new to me and never heard it before. could you elaborate further or give a link to back it up?
the german economy had a short upturn after the wall fell but from 1995 the downturn began and there was a stagnation period of more than 10 years, it was just in 2007 when the economy started to grow again. so where did the fear of overheating should come from?

German economy was exactly in the same shape as Irish real economy was
It was no growth in industry jobs since 1998 and instead of real growth we had visibility of growth based on external borrowings
If Germans would allow money money stay in Germany then they would have exactly the same bubble based on consumer demand, but they understood importance of regulation and transferred inflation away

tara73

alrright, thanks for that input, it is definetely very interesting, but my question wasn't about specific actions between german and irish banks, it was about the 'fault' of the ecb and the ecb is a european institution made up fom members of almost all eu countries, directors changing in an 8 year period.

just found some descriptions about the tasks of the ECB and within other known tasks it actually says it should have an eye/regulate the european financial markets and their price stability.
so there is some truth in claiming they should have had a closer eye on Greece, Spain etc. and Ireland and the big bubble happening...but then it still goes back as well that there should have been adult behaviour expected from the now so called 'piig countries' to not overborrow.

but nothing is obviously black and white in this finacial markets where everything is interconnected so the 'guilt', if to call it like that, spreads out to many different circumstances involved...

ei.sdraob

Finally, more and more people are realizing that the central banking system (both ECB and ICB) are at fault and has issues. As the austrians have been shouting from rooftops for long time now!

While many people/developers etc done stupid things, what enabled it all was loose monetary policy and no regulation. And now we have the ECB with its multiple personality disorder driving more and more states over the edge.

ei.sdraob

RichardAnd wrote: »

The ECB made it possible for Irish banks to borrow wild amounts of money who would then lend relativity wild sums of cash to hundreds of thousands of paddies who had no hope of ever paying it back.

There's a circle of blame in this. We can blame banks for lending but really, no one was made to borrow.

Ireland's woes are, in my opinion at least, the culmination of decades of nepotism in the public sector and political classes, dire incompetence from the men who hold the reins, apathy and nonchalant attitudes from the great unwashed and the great unity of the Celtic Tiger; Greed.

Yes the inbreeding/gombeenism is at fault BUT the ECB/Regulator acted as fetiliser/catalyst to enable all this weed and junk to grow and choke the economy.

later12

The ECB is not the Deutsche Bundesbank. The Bundesbank has ( and had, pre euro) a regulatory as well as a monetary stability objective. The ECB, throughout the Celtic tiger period, only ever had a monetary objective - i.e. to ensure price stability.

The only slight responsibility that the ECB had for financial supervision was to ensure the smoothe running of the TARGET payments system - so really nothing to do with regulation, at all.

It was the role of the European Central Bank to preserve price stability, therefore, by aiming to keep inflation at its target rate of 2%. To do this, it has to regard the overall inflationary rate of the Eurozone, and react accordingly. It cannot cherrypick countries where inflation is particularly high or particularly low, or where the economy is overheating, and interfere in those sovereign economies - the ECB simply cannot do this. If it did, it would be told where to shove it (by quoting the treaties).

So while it is perfectly reasonable to suggest that the ECB did not interfere, one must remember that it was never in their architecture to interfere, they were not the regulators, they were not allowed to give special attention to Ireland, they had to deal with the Eurozone as a bloc.

As far as I am concerned, one might criticise the founders of the Eurozone for their blind dismissal of the inappropriate architecture of the Euro. However, to blame the ECB - which is not staffed by politicians, and is not political - for the structure they have been given to work with, is pointless and has no basis in fact.

femur61

RichardAnd wrote: »

The ECB made it possible for Irish banks to borrow wild amounts of money who would then lend relativity wild sums of cash to hundreds of thousands of paddies who had no hope of ever paying it back.

There's a circle of blame in this. We can blame banks for lending but really, no one was made to borrow.

Ireland's woes are, in my opinion at least, the culmination of decades of nepotism in the public sector and political classes, dire incompetence from the men who hold the reins, apathy and nonchalant attitudes from the great unwashed and the great unity of the Celtic Tiger; Greed.

Totally agree with you, we got cheap money from Europe and subsequently we lent it to our nation, we went mad people got greedy now everyone is suffering. Bertie kept insisting we're grand, hired minions in the regulatories office he could control.

Scofflaw

OK - my now standard question. If the Irish banks were stuffed with German money (or eurozone money more generally) during the boom, where the heck is the evidence of it?

We have Irish Central Bank aggregated balance sheets for 2003-2011 for the following groups of banks:

1. the bailed-out banks - that is, the six institutions we're bailing out
2. the domestic banks - that is, banks that have any dealings with the Irish domestic market, a group of 20 which includes the 6 bailed out banks
3. "all banks in Ireland" - that is, any bank resident in Ireland, whether it has any dealings with the Irish domestic market or not. That's 78 banks, which includes the subsidiaries of eurozone, UK, and US banks in the IFSC.

and we have the Basel Bank of International Settlements country data, which covers essentially the same list as the third one above, although it's 83 institutions rather than 78.

Of those groups, the one we really care about is group 1, the bailed out banks (and our major domestic banks) - but group 1's aggregate balance sheet doesn't show any great influx of eurozone money. Instead, it shows a high point of €16.575bn in bonds owned by eurozone counterparties, back in April 2007. At the time, the total value of securities issued by the covered banks was €120.5bn, so the eurozone contribution to the covered banks at their highest point was only about 13.5%. The "rest of world" contribution (neither Irish nor eurozone) was €80bn, which was around 65-70% of the money. The rest is Irish.

For the domestic banks, same story - €17.9bn, which means that the domestic Irish banks other than the bailout banks only had a little over a billion in eurozone funding. Rest of world contribution, about €85bn. Total, about €133bn.

Move on to all the Irish banks, including the IFSC ones, and you'll find a high point of €50bn. Rest of world contribution, €180bn. Total, about €260bn. The Basel figures show much the same here, which is hardly surprising, given they cover basically the same banks.

So there was a chunk of eurozone money flowing through banks in Ireland, but very little of it flowed into the Irish domestic economy, and it was very small compared to the contributions from the rest of the world - which in this case will largely be the financial centres of London and New York.

The Irish domestic banks didn't get their money from the eurozone. They bought it on the wholesale debt markets in London and New York. That's what the figures show, so the story that the eurozone flushed money through the Irish banks with the complicity of the ECB cannot be made to stand up.

cordially,
Scofflaw

tara73

later10 wrote: »

The only slight responsibility that the ECB had for financial supervision was to ensure the smoothe running of the TARGET payments system - so really nothing to do with regulation, at all.

It was the role of the European Central Bank to preserve price stability, therefore, by aiming to keep inflation at its target rate of 2%. To do this, it has to regard the overall inflationary rate of the Eurozone, and react accordingly. It cannot cherrypick countries where inflation is particularly high or particularly low, or where the economy is overheating, and interfere in those sovereign economies - the ECB simply cannot do this. If it did, it would be told where to shove it (by quoting the treaties).

So while it is perfectly reasonable to suggest that the ECB did not interfere, one must remember that it was never in their architecture to interfere, they were not the regulators, they were not allowed to give special attention to Ireland, they had to deal with the Eurozone as a bloc.

As far as I am concerned, one might criticise the founders of the Eurozone for their blind dismissal of the inappropriate architecture of the Euro. However, to blame the ECB - which is not staffed by politicians, and is not political - for the structure they have been given to work with, is pointless and has no basis in fact.

this is a link to the declaration of purposes and tasks for the ECB:

http://europa.eu/about-eu/institutions-bodies/ecb/index_en.htm

quote from their webside:

The European Central Bank (ECB) is one of the EU institutions. Its main purpose is to:

• keep prices stable (keep inflation under control), especially in countries that use the euro.
• keep the financial system stable – by making sure financial markets and institutions are properly supervised.

Tasks

The ECB's role includes:

• setting key interest rates for the eurozone and controlling the money supply
• managing the eurozone's foreign-currency reserves and buying or selling currencies when necessary to keep exchange rates in balance
• helping to ensure financial markets and institutions are adequately supervised by national authorities, and that payment systems function smoothly
• authorising central banks in eurozone countries to issue euro banknotes
• monitoring price trends and assessing the risk they pose to price stability.

so for me it actually reads as if they have direct influence on other countries financial actions and outcome and not only in general.

or is it just buraucratic whaffling, means can they only give out warnings and hints regarding for example inflation rate to countries with high rates but then it's still up to the affected country to change it or not? bit useless then I would say...

tara73

ei.sdraob wrote: »

Yes the inbreeding/gombeenism is at fault BUT the ECB/Regulator acted as fetiliser/catalyst to enable all this weed and junk to grow and choke the economy.

how?

I ask the question again, nobody answered it before: if Ireland had any better conditions to borrow the money than other eu countries where there wasn't a bubble and endless lending, there would be a point.
so, had they?

or the other possibility: did the ECB knock on berties door every day, every week, every month telling him to borrow the 'cheap' money, promising endless fortunes?
can't imagine they did that and even if it was like that one should be that clever not to believe it...any halfway grown up/responsible people know that sooner or later banks want their money back:eek:

so I can't see any major part the ECB played in this. To blame them it's a childs point of view who argues the cake was available so I ate everything. which is reasonable for a child. the mummy is in this case responsible to look out for it.


so anybody who's blaming the ecb is directly admitting: yes, we are irresponsible children although we are grown ups and we need a mommy to look out for us. and that is the ecbs' fault?

Pete_Cavan

RichardAnd wrote: »

The ECB made it possible for Irish banks to borrow wild amounts of money who would then lend relativity wild sums of cash to hundreds of thousands of paddies who had no hope of ever paying it back.

There's a circle of blame in this. We can blame banks for lending but really, no one was made to borrow.

Ireland's woes are, in my opinion at least, the culmination of decades of nepotism in the public sector and political classes, dire incompetence from the men who hold the reins, apathy and nonchalant attitudes from the great unwashed and the great unity of the Celtic Tiger; Greed.

I agree with the first point, that the ECB kept interest rates low, in order to support Germany and Frances economies, which allowed credit to flow into our economy, fueling the bubble.

However, I think the last section, which I have in bold is the main point. Our government offered tax breaks and further incentivised building houses and followed a policy of light touch regulation wrt the banks. And when anyone suggested the property bubble was getting too big and would cause an economic disaster when it burst (and all bubbles burst, ours was never going to be the exception), Bertie said "I don't know how people who engage in that don't commit suicide".

So, in the end no, the current situation is not the ECBs fault - it is the fault of the Irish government who are, in turn, the fault of the Irish electorate. We have to stop looking for others to blame and start taking responsibility for our actions and stop electing populist nonsense spouting teachers and auctioneers to government, until then the blame will lie squarely with us.

Prakari

What concerns me more is the ECBs conduct following the crisis. The ECB’s main priority appears to be to save the European banking system. The European banks are so highly leveraged that even a small haircut from institutions in states like Greece and Ireland could push these banks over the edge. The idea is to transfer the problem from the banking system to sovereign states so that Trichet’s friends can get their Christmas bonus.

clear thinking

tara73 wrote: »

there's obviously a strong opinion from many people here that the current economic situation the country is in is mainly the fault of the ECB.

I tried to figure out why this should be the case but it's all very confusing so I would like to know where this opinion is coming from as well as the other side who have points to say, that it's not the case.

thanks!

Quite simple, the Irish banks lent out €400bn and the ECB didn't notice, therefore it is their fault.

The ECB replaced deposits from other banks at much cheaper rates about 9 months ago when those deposits were withdrawn. They now have us by the short and curlies, therefore it's their fault. To the tune of €170bn.

Although you could also interpret the same information in exactly the opposite way.

Sand

The ECB isnt a baddie or a goodie. It is simply fighting its own corner, representing its own interests, which contradict our interests. This doesnt make them evil, it just means theyre our opponents in negotiations.

Events that impacted the Irish situation up until the last quarter of 2008 are almost entirely the fault of the Irish civil service and political leadership who completely lost recognition of the new world they were operating in. We should never, ever lose sight of that. The Irish civil service and Irish political structures failed utterly to cope with the new demands that were placed upon it by the Euro project.

Now, if anyone thinks this couldnt have been forseen - it simply wasnt true. Even uninformed eejits like myself were posting back in January 2002 that there were serious consequences to the Euro project. Even then we had early warning of where we lay in the ECBs priorities. It should have been clear that if we ever got into choppy waters, wed be left to drown.

They have another argument which is hard to counter

When you have your own currency you have your own monetary policy which is an extremely useful economic tool. Witness our own difficulties last year when our overheating economy was crying out for some action, but we couldnt take any- and the ECB wasnt interested in 1% of Euro land. There are other ways of tackling inflation of course- Ive seen papers that argue the government should meet over extended demand by encouraging supply- be it in housing or whatever.

Im for the Euro but it should be remembered their are some good reasons for not joining the Euro. The Bretton Woods agreement for example fell apart thanks to the US's massive social spending. There are spending limits for the current Euro governments- But it will be interesting to see Germany handles its difficulties- Either break the limits it itself demanded or pay a large fine in an election year- not really vote getter for the nationalist sentiments.

The real puzzle will be if the UK can still attract investment and compete with its EU partners when its currency is so strong against the Euro. There are benefits and as I mentioned above consequences to joining the Euro.

If random people were discussing this on internet discussion boards back in 2002, it should have been pretty common knowledge to the DoF and the government.

They simply failed to take into account the realities of the Euro project despite repeated warning from "meddling" outsider economists - Jim Power was pushed out of Ulster Bank because he offended the government when he stated to a House of Lords committee that he didnt think the Irish state had the discipline to cope inside a common currency.

Thats entirely the fault of the Irish civil service and the Irish political system. All the Euro and the ECB enabled was the conditions for the Irish state institutions to demonstrate how incompetent they were. And are. Many other countries, including small peripheral states survived (or thrived) under the same conditions, because they have better systems of governance.

That said:

Since late 2008, early 2009, the ECBs involvement in our affairs has been almost entirely negative.

They have contributed to making an already bad situation vastly worse by constantly opposing decisive actions to impose losses on bank bondholders, and aidding and abetting the socialisation of Eurozone private losses onto a specific Eurozone member.

They are a dysfunctional organisation. Its fair to note that they dont actually have a specific role beyond maintaining an inflation target, but theyve been happy to exceed that when then feel like it by pulling together "bailouts" and threatening national governments and undermining attempts by EU to reach policy solutions. So theyve demonstrated admirable flexiability in exercising their powers, but unfortunately in the pursuit of stupid policies.

Regardless of the outcome of this crisis, its fair to say that Ireland will survive as a nation and a state. However, the ECB, and perhaps even the Euro, will not survive.

tara73

Sand wrote: »

However, the ECB, and perhaps even the Euro, will not survive.

I never got behind the expected benefits of the euro. To not have to change currencies when traveling to another country is nice but it wasn't the main reasons for the 'eu-bosses'...

It might be of interest of some here if not already known that the german ordinary people never ever wanted the euro, for sure they wanted to keep their strong and safe d-mark.
that's why there was never a vote for it, the big politicians (you can take the big literally here;)) just decided it because they new a public vote as it was done in denmark would bring a definite no to the euro.

the only 'benefit' in germany for the ordinary people was, prices rose from one day to the other of sometimes 100%. It was a rip off.

Sand wrote: »

Regardless of the outcome of this crisis, its fair to say that Ireland will survive as a nation and a state.

I really hope so, and I mean that from my heart. I had the best time of my life in Ireland, the happieness, warmth, welcoming friendly attitude and the humour is priceless and not to be found anywhere else in the world. So this is the real value of Ireland and from my point of view much much more worth than any money!
I hope the little nation will stick to this values and don't let themselves drag down too much from all the mess the money and greed created and as well hopefully learn something from it!

there's a saying: money destroys the character.
and that's true imo and experience:).

hmmm

tara73 wrote: »

I never got behind the expected benefits of the euro. To not have to change currencies when traveling to another country is nice but it wasn't the main reasons for the 'eu-bosses'...

The main benefit of the Euro was to eliminate currency fluctuations between trading nations and thereby allow exporters (and importers) to trade without the distraction of hedging currency exposures. As a small trading nation this is a very important benefit for Ireland.

the only 'benefit' in germany for the ordinary people was, prices rose from one day to the other of sometimes 100%. It was a rip off.

This is the only benefit if you were naive. I'm sure someone has tried to quantify the increase in trading activity within Europe as a consequence of the Euro, I don't know where to find this information however. From personal experience I know it has had a big impact by eliminating a major headache for Irish exporters.

there's a saying: money destroys the character.
and that's true imo and experience:).

Worse is trying to blame someone else when you yourself make a mistake. The ECB had no responsibility to regulate our banks, that was the responsibility of the Irish government & the regulator we appointed. I guarantee that if, 10 years ago, the ECB had tried to interfere with our regulator we'd have had these message boards explode in outrage at the European interference in our national affairs.

beeftotheheels

hmmm wrote: »

This is the only benefit if you were naive. I'm sure someone has tried to quantify the increase in trading activity within Europe as a consequence of the Euro, I don't know where to find this information however. From personal experience I know it has had a big impact by eliminating a major headache for Irish exporters.

No hard facts and figures but the German Finance Minister seems to agree with you.

GERMANY HAS benefited most from the euro, and has the greatest responsibility to defend the single currency, finance minister Wolfgang Schäuble has said.

http://www.irishtimes.com/newspaper/finance/2011/0611/1224298736676.html

careca11

tara73 wrote: »

there's obviously a strong opinion from many people here that the current economic situation the country is in is mainly the fault of the ECB.

I tried to figure out why this should be the case but it's all very confusing so I would like to know where this opinion is coming from as well as the other side who have points to say, that it's not the case.

thanks!

the way I see it is like this
Irish banks went to European banks requesting billions and billions ...gauranteeing great returns based on the property boom (so Iirsh banks lied to euro banks)

Irish banks then lent money out willy nilly , driven by huge bonus's based on money's lent out , so virtually nobody was going to be refused a loan/mortgage regardless of income because the banker/branch manager/area manager/senior manager(what ever way its internally structured) was going to cream it
and because the boom give the impression that the country was awash with money , nobody within the banking sector/regulator/political circle really gave a monkies that nothing was being paid back by some of the major developer's .

The Irish banks lied , and lied and lied again , again and again feeding the press the politicans/their friends these lies and they all fell for it.

so in my eyes .................THE IRISH BANK'S AND ITS ELITE BANKERS/REG/POLITICAL FRIENDS (ff,fg,greens, labour) are all to blame due to the lies and the spin

look how seanie fitz etc convinced people the likes of sean Quinn etc to buy millions of shares as it was easy money

look how Bertie lamblasted any economist that Question the Vulnerability of the banks and the credit bubble

and it is no coincident that Bertie Jumped ship before it all came crumbling down (did he see all this coming .........................OF COURSE HE DID)

remember mick wallace back in 2008 on prime time being interviewed , he got something like €136m from a bank 2 years previous on the programme he stated "the bank hasn't comeback to me yet looking for payment, with banks like that, this boom will end in tears"

sorry I cannot find the link as have limited website access

Scofflaw

Irish banks went to European banks requesting billions and billions ...gauranteeing great returns based on the property boom (so Iirsh banks lied to euro banks)

The thing is, though, that nobody has ever actually shown this to be the case. What seems to have happened, instead, is that Irish banks bought short-term credit on the wholesale money markets (which are primarily London and New York) in order to fund their lending. Nor did they, as such, have to lie to do so - the ratings agencies and the markets all thought this was the most amazing wheeze ever, and an exciting new way of doing business - pioneered by Anglo, and followed to greater or lesser extent by the other Irish banks, who were afraid of losing market share to Anglo.

Now, if I borrow money from you for a day, in order to lend it to someone who won't be paying me back for a year, it should be obvious where the danger lies. I need to keep coming back and borrowing for yet another day in order to pay back the previous day - for 365 days, until the guy I lent to pays me back. If at any point I can't find a day's funding, I'm stuck.

cordially,
Scofflaw

noodler

Scofflaw wrote: »

The thing is, though, that nobody has ever actually shown this to be the case. What seems to have happened, instead, is that Irish banks bought short-term credit on the wholesale money markets (which are primarily London and New York) in order to fund their lending. Nor did they, as such, have to lie to do so - the ratings agencies and the markets all thought this was the most amazing wheeze ever, and an exciting new way of doing business - pioneered by Anglo, and followed to greater or lesser extent by the other Irish banks, who were afraid of losing market share to Anglo.

Now, if I borrow money from you for a day, in order to lend it to someone who won't be paying me back for a year, it should be obvious where the danger lies. I need to keep coming back and borrowing for yet another day in order to pay back the previous day - for 365 days, until the guy I lent to pays me back. If at any point I can't find a day's funding, I'm stuck.

cordially,
Scofflaw

I wonder, and not that I doubt your argument, why Irish banks suddenly decided to/were able to borrow huge amounts of money from non-Euro sources once they were members of the Euro?

meglome

catbear wrote: »

Blaming the ECB is like blaming the rope maker when someone hangs themselves. You could ban rope but then people would still find other ways to self destruct.

Very well said. The world was awash with cheap credit and without the ECB we'd have got it elsewhere and did get it elsewhere. Credit bubbles are created simply by access to cheap credit, something that has existed long before the ECB came along. I've said this before but if you leave an adult with a bag of sweets you don't expect them to have eaten them all and puked on the floor.

Sand

noodler wrote: »

I wonder, and not that I doubt your argument, why Irish banks suddenly decided to/were able to borrow huge amounts of money from non-Euro sources once they were members of the Euro?

As Morgan Kelly noted, they are run by slightly dim former rugby players, who were fine to run a small country store or maybe a dozy practise. Then Bank of Scotland arrived in 1999 and unleashed itself upon the Irish residential mortgage market, offering unheard of deals to Irish borrowers. Meanwhile Anglo-Irish was lending to anyone and everyone over the age of 11. Or who claimed to be over the age of 11.

So dozy Irish bankers found themselves losing market share, and also found their banks profitability being compared unfavourably to the all-star performers of Anglo-Irish. They suddenly realised that had the new and previously unheard of power to borrow money short and very low rates and lend it long so they too could chase for the stars. Being dim, knowing they could settled the decision - they never wondered if they should.

The rest is history.

All of our problems up to late 2008 are almost entirely home grown. Trying to spin it otherwise is like blaming the resteraunt for serving you hot coffee you later scald yourself with.

McDave

Scofflaw wrote: »

The Irish domestic banks didn't get their money from the eurozone. They bought it on the wholesale debt markets in London and New York.

Furthermore, Irish banks could have accessed this money if we were outside the Eurozone. OK, outside the Eurozone, we mightn't have had as much FDI, so our sense of well-being might have been less inflated. But cheap money was still available to all-comers, regardless of any policy the ECB could have realistically pursued.

Tea drinker

tara73 wrote: »

how?

I ask the question again, nobody answered it before: if Ireland had any better conditions to borrow the money than other eu countries where there wasn't a bubble and endless lending, there would be a point.
so, had they?

or the other possibility: did the ECB knock on berties door every day, every week, every month telling him to borrow the 'cheap' money, promising endless fortunes?
can't imagine they did that and even if it was like that one should be that clever not to believe it...any halfway grown up/responsible people know that sooner or later banks want their money back:eek:

so I can't see any major part the ECB played in this. To blame them it's a childs point of view who argues the cake was available so I ate everything. which is reasonable for a child. the mummy is in this case responsible to look out for it.


so anybody who's blaming the ecb is directly admitting: yes, we are irresponsible children although we are grown ups and we need a mommy to look out for us. and that is the ecbs' fault?

It's not that there was better conditions, just more favourable conditions for the BANKS to lend into. All countries experience property bubbles or asset bubbles at some stage. The plebs are the last to know, but one expects paid experts to be able to exert some foreknowledge. I say this as someone who saw the property bubble and refused to participate in it. In fairness it was obvious. In any event the foreign banks (who ever they are) made a business decision to loan as much money as possible into the Irish market. The flipside of your argument is no one forced them to do this.

Could you send a note to the Bank of Ireland board and shareholders telling them about your thoughts about grown ups paying money back?
Undoubtedly they will be pleased ;-)
The flip side of this coin is that as a business (and grown ups) they are failed in both respects, the "business" was ran into the ground and now rather than pay back what they owe they are mugging taxpayers.
A bank is a business and MUST lend prudently. Putting all the burden on the plebs is NOT enough. People are paid to do a job in that bank, not just act as an ATM. They KNEW there was a property bubble.

The Irish banks lied repeatedly about the amount of money they wanted to confiscate from the taxpayers. This was a fraud perpetrated on taxpayers and no so far no one is jailed because of it.

Irish central bank made some warnings about the bubble, maybe more should have been done. We all know there were breaches of regulation and no one is jailed for this either.

overall we done it to ourselves. Voting FF , celebrating gombeenism and corruption as "culture".

Scofflaw, this graph says Germany is Irelands biggest debtor, how does this correlate to your informaition claiming they are not "systemic"
http://www.marketoracle.co.uk/Article19480.html

I have heard many times that the save happy Germans sent their money abroad for better gains outside Sluggish Germany, I mean it seems obvious, and I also heard it was done as policy ot take heat from their economy.

Finally the Irish "media" with their constant wh0ring of the property fiasco have to answer for something. RTE must have had a property programme on every night at the height of the boom. Sure what else would a bunch of coke addicts think up.


Ultimately as there is a world wide problem with financial institutions and yes the Euro and ECB is part of the problem, and they seem to have adapted little to the new environment. Unless you can find some way to explain how the Irish collapsed Lehman brothers etc then there really is very little burden on us. The big boys failed and are still failing to properly regulate the market as they have been bought out.

noodler

Sand wrote: »

As Morgan Kelly noted, they are run by slightly dim former rugby players, who were fine to run a small country store or maybe a dozy practise. Then Bank of Scotland arrived in 1999 and unleashed itself upon the Irish residential mortgage market, offering unheard of deals to Irish borrowers. Meanwhile Anglo-Irish was lending to anyone and everyone over the age of 11. Or who claimed to be over the age of 11.

So dozy Irish bankers found themselves losing market share, and also found their banks profitability being compared unfavourably to the all-star performers of Anglo-Irish. They suddenly realised that had the new and previously unheard of power to borrow money short and very low rates and lend it long so they too could chase for the stars. Being dim, knowing they could settled the decision - they never wondered if they should.

The rest is history.

All of our problems up to late 2008 are almost entirely home grown. Trying to spin it otherwise is like blaming the resteraunt for serving you hot coffee you later scald yourself with.

Ah my point was questioning the CB data - was the huge inlfux in the "ROW" category round about the time we joined the Euro related to actually joining the euro, intermediaries? accounting procedures?

Just speculating above the usual mainstream stuff.

noodler

Tea drinker wrote: »

Could you send a note to the Bank of Ireland board and shareholders telling them about your thoughts about grown ups paying money back?
Undoubtedly they will be pleased ;-)

I'd probably tell them that the value of your investment can go up or down and that they made it of their own free will.

Tea drinker wrote: »

Scofflaw, this graph says Germany is Irelands biggest debtor, how does this correlate to your informaition claiming they are not "systemic"
http://www.marketoracle.co.uk/Article19480.html

I recognise the graph - I believe it is based on the Bank of International Statistics figures which unfortunately include the IFSC.

"while the focus is on German and French banks, the greatest exposure is by UK banks [mainly, the parents of Ulster Bank and Bank of Scotland (Ireland) - - over £120bn].
Bank for International Settlements (BIS) data is often cited but the Irish figures are confusing because they include data in respect of foreign banks at Dublin's offshore centre, the IFSC.
The German Bundesbank said last November that German bank direct exposure to Ireland was about €25bn not $139bn as stated in BIS data."


http://www.finfacts.ie/irishfinancenews/Irish_Economy/article_1021633_printer.shtml


Essentially, the BIS statistics include the IFSC banks and other banks in Ireland which our Government has no link to. This serves to wildly over exaggerate the figure.

Anonymous1987

An interesting graph below via Irisheconomy.ie shows how inflation in the core matches against the periphery. The Taylor rule is a rule of thumb dictating the appropriate monetary policy for a given inflation and unemployment rate although usually GDP is used rather than unemployment. The periphery group in this case consist of Ireland, Spain, Greece and Portugal while the core consist of all others. So while Eurozone monetary policy as whole might be appropriate, wide variations for specific groups appear. The ECB monetary policy is clearly inappropriate for the periphery economies both in the past and the present.



http://www.frbsf.org/publications/economics/letter/2011/el2011-18.pdf

later12

Indeed, here you can see that in the period from 2000 - 2008, the rate was, on average, almost 3% lower than the Taylor rate would have suggested it should have been, and just look at Irish household debt, up there at the top of the class (or is that down the back?)

hmmm

Anonymous1987 wrote: »

The ECB monetary policy is clearly inappropriate for the periphery economies both in the past and the present.

We knew this was going to be the case going into the Eurozone, and the appropriate response by our government & regulator should have been counter cyclical fiscal policy and stronger regulation. The tools were in our hands to control the property bubble, unfortunately we voted some tools into power instead.

Scofflaw

Tea Drinker wrote:

Scofflaw, this graph says Germany is Irelands biggest debtor, how does this correlate to your informaition claiming they are not "systemic"
http://www.marketoracle.co.uk/Article19480.html

As noodler said - that's from the BIS figures, which cover 83 financial institutions here, including the IFSC. There's a lot of eurozone money in the IFSC, certainly, but it has no particular relevance to the Irish economy, and doesn't bear any useful relation to the money in our domestic banks.

Tea Drinker wrote:

I have heard many times that the save happy Germans sent their money abroad for better gains outside Sluggish Germany, I mean it seems obvious, and I also heard it was done as policy ot take heat from their economy.

As far as I can make out, McWilliams put forward that idea in "The Pope's Children", and everybody has taken to regarding it as gospel, because, as you say, it makes a sort of intuitive sense. Unfortunately, it appears nobody has actually ever shown it to be the case. I'm currently harassing Karl Whelan about using it, and so far he has entirely failed to put forward any evidence for it.

I'm deeply leery of things for which the only evidence is "it seems obvious", because by and large the real world is never obvious. If it was, we wouldn't need science, and we probably wouldn't have religion.

cordially,
Scofflaw

later12

hmmm wrote: »

We knew this was going to be the case going into the Eurozone, and the appropriate response by our government & regulator should have been counter cyclical fiscal policy and stronger regulation. The tools were in our hands to control the property bubble, unfortunately we voted some tools into power instead.

We did know that going into the Eurozone, certainly. I don't think anybody would absolve the Government of responsibility in that regard.

In fact pointing out how far out of sync interest rates were with some individual economies is not exactly a criticism of the ECB. It is a criticism of the faulty architecture of European monetary and fiscal governance - therefore ultimately a criticism of European governments. At the end of the day, the ECB was never its own architect, it was the subject of European Governments.

The governments of the Eurozone have two hats. One hat for domestic policym the other for common and monetary policy.

In the establishment phase of the Eurozone, the governments first donned their domestic hats and, fair enough, protected themselves from European 'interference' as they might have seen it.
But they failed to wear the second hat. They failed to think as a bloc, and failed to consider how, as a bloc, do defend themselves from their domestic hat wearing selves.

In other words, the Eurozone was made up of members with split personalities. This led to them speaking out of one side of their mouths when their domestic hats were on, and saying something completely different (in the form of their ECB) with their European hats.

I am sure the rarity of European hat wearing has something to do with the practical political management of the Eurozone, whose Finance ministers only meet once in a full moon, and only then when ECOFIN (the wider EU) is meeting. Unlike ECOFIN, the wider group of finance ministers don't even have an official name.

So criticism of the ECB is fair, in my opinion. Not of the ECB itself, but of its architecture, and of the policies that came out of its construction.

Scofflaw

later10 wrote: »

We did know that going into the Eurozone, certainly. I don't think anybody would absolve the Government of responsibility in that regard.

In fact pointing out how far out of sync interest rates were with some individual economies is not exactly a criticism of the ECB. It is a criticism of the faulty architecture of European monetary and fiscal governance - therefore ultimately a criticism of European governments. At the end of the day, the ECB was never its own architect, it was the subject of European Governments.

The governments of the Eurozone have two hats. One hat for domestic policym the other for common and monetary policy.

In the establishment phase of the Eurozone, the governments first donned their domestic hats and, fair enough, protected themselves from European 'interference' as they might have seen it.
But they failed to wear the second hat. They failed to think as a bloc, and failed to consider how, as a bloc, do defend themselves from their domestic hat wearing selves.

In other words, the Eurozone was made up of members with split personalities. This led to them speaking out of one side of their mouths when their domestic hats were on, and saying something completely different (in the form of their ECB) with their European hats.

I am sure the rarity of European hat wearing has something to do with the practical political management of the Eurozone, whose Finance ministers only meet once in a full moon, and only then when ECOFIN (the wider EU) is meeting. Unlike ECOFIN, the wider group of finance ministers don't even have an official name.

So criticism of the ECB is fair, in my opinion. Not of the ECB itself, but of its architecture, and of the policies that came out of its construction.

Absolutely the case. The ECB is an institution created by the Member States, as all EU institutions are. As the majority of EU institutions tend to, it suffers from the schizophrenia later10 outlines above - something is created to act in the European interest by people whose primary interest is not the European interest, and the result tends to be something without quite the powers required to act in the European interest, or to curb the tendency of the Member States to act in their individual interest when the chips are down.

Ordinary citizens tend to see quite clearly what an institution should be, but not so much how it has been hobbled. Much of the blame ascribed to the ECB would be appropriate for the institution the ECB perhaps ought to have been, but isn't. In turn, that offers the interesting possibility that popular expectation is a driver of integration during crises.

cordially,
Scofflaw

noodler

Scofflaw wrote: »

As noodler said - that's from the BIS figures, which cover 83 financial institutions here, including the IFSC. There's a lot of eurozone money in the IFSC, certainly, but it has no particular relevance to the Irish economy, and doesn't bear any useful relation to the money in our domestic banks.



As far as I can make out, McWilliams put forward that idea in "The Pope's Children", and everybody has taken to regarding it as gospel, because, as you say, it makes a sort of intuitive sense. Unfortunately, it appears nobody has actually ever shown it to be the case. I'm currently harassing Karl Whelan about using it, and so far he has entirely failed to put forward any evidence for it.

I'm deeply leery of things for which the only evidence is "it seems obvious", because by and large the real world is never obvious. If it was, we wouldn't need science, and we probably wouldn't have religion.

cordially,
Scofflaw

Not sure why he is being so elusive on the issue.

Just looking at the three categories of CB stats:

1) All
2) Domestic Credit Institutions (Retail both Domestic and Foreign)
3) Just the 6 ELG Guaranteed banks/building societies

There was definitely a huge influx in the first two if only an 8bn increase in the our category.

There is obviously the point ot be made that even a large increase in EURO money for foreign retail banks serving the Irish economy like KBC or NIB would obviously have a large effect on the Irish economy in terms of the property boom and in influencing the ELG banks' behaviour.

One last point, the stats for the ELG banks were only introduced this year (Feb or March I believe) so for years before that, when we looked at the CB figures people would have been including KBC etc if they looked at cateogry 2) and the IFSC banks if they looked at category 3). Can you tell from the individual bank's annual results which area their bonds issuances took place? I mean if they are in euros then does it autmatically necessitate that it is owed to an institution in th1 17-state euro area?

ei.sdraob

ECB wrote:

“In the meantime, we may have to come to the conclusion that it doesn’t really make sense for the ECB to keep putting €100 billion into Irish banks. What we are doing is actually illegal, but we have being doing it because we want to help Ireland. Maybe we might come to the conclusion that we should stop,” said the ECB source.

http://www.irisheconomy.ie/index.php/2011/06/19/the-ecb-responds/

OUCH :eek:

Scofflaw

ei.sdraob wrote: »

http://www.irisheconomy.ie/index.php/2011/06/19/the-ecb-responds/

OUCH :eek:

Ouch indeed, assuming it's true - but it answers the vexed question of whether the ECB have been acting beyond their remit in providing liquidity...

I can't quite decide whether the ECB acting independently is objectionable in itself, or whether it's just that because the current use being made of that independence is against our interests (narrowly defined) it seems objectionable. While the case for the independence of central banks has been made quite conclusive, the ECB seems to be wielding its not inconsiderable power with a little too much gusto - or is that just because we're used to the supine state of the CBI? The latter did us no favours, as it turns out.

cordially,
Scofflaw

Sand

Its bold words, but the reality is they have given us the money. Theyre realiant on us paying them back. So if they stop lending to us, they will have to suck up a 100 billion euro loss. Not to say what it would do to the wider Eurozone when the ECB starts to arbitrarily turn on or turn off liquidity based on a whim.

Its worth highlighting though - given people try to excuse stupid ECB policy by pointing to what the ECB legally cant and cannot do - that the ECB source admits what the ECB is currently doing is illegal. It demonstrates that legality/illegality is a not a barrier to them pursuing the correct strategy, should they wish to.

Scofflaw

Sand wrote: »

Its bold words, but the reality is they have given us the money. Theyre realiant on us paying them back. So if they stop lending to us, they will have to suck up a 100 billion euro loss. Not to say what it would do to the wider Eurozone when the ECB starts to arbitrarily turn on or turn off liquidity based on a whim.

Its worth highlighting though - given people try to excuse stupid ECB policy by pointing to what the ECB legally cant and cannot do - that the ECB source admits what the ECB is currently doing is illegal. It demonstrates that legality/illegality is a not a barrier to them pursuing the correct strategy, should they wish to.

I suspect it's not as simple as "should they wish to". They can be curbed by reference to their legal capacity if it's in the interests of the member states to do so.

cordially,
Scofflaw

Sand

I suspect it's not as simple as "should they wish to". They can be curbed by reference to their legal capacity if it's in the interests of the member states to do so.

Pointing out their limited legal capacity doesnt seem to curb Trichet or LBS from trying to (loudly, very loudly) dictate policy over the heads of the EU governments.

Scofflaw

Sand wrote: »

Pointing out their limited legal capacity doesnt seem to curb Trichet or LBS from trying to (loudly, very loudly) dictate policy over the heads of the EU governments.

No, that's true - but what they tend to be doing in those cases is wielding their legal obligations as a stick, as here.

cordially,
Scofflaw

Sand

Scofflaw wrote: »

No, that's true - but what they tend to be doing in those cases is wielding their legal obligations as a stick, as here.

cordially,
Scofflaw

But - presuming were both referring to the "We cant accept Greek bonds if theres a default" case - the ECB are making up legal obligations in that case. They set their own requirements for collateral.

Even in the case where the ECB is blatantly breaking its legal obligations (I've always been mystified by the argument against Irish bank default that was based on the ECB being unable to support insolvent banks - Irish banks are insolvent now, post default they would be solvent by definition) the ECB has a pretty strong defence:

"You're wrong. To the uneducated eye, it might appear we are in breach of our legal obligations, but as our lawyers are happy to explain we actually arent".

They then send their critics on a merry lap of the various EU treaties, guided by lawyers. By the time a conclusion is reached, the "facts on the ground" will already be established.

Lets face it, the liquidity support for the insolvent Irish banks (propped up by an insolvent state) is based entirely on wishful thinking and fantastical growth projections. The worst policy choices have been supported by simply making stuff up, ignoring the rules and pretending everything will turn out for the best. I dont see why correct policy choices cant be supported using a similar methodology, should a revolution of common sense suddenly break out.

Scofflaw

Sand wrote: »

But - presuming were both referring to the "We cant accept Greek bonds if theres a default" case - the ECB are making up legal obligations in that case. They set their own requirements for collateral.

Even in the case where the ECB is blatantly breaking its legal obligations (I've always been mystified by the argument against Irish bank default that was based on the ECB being unable to support insolvent banks - Irish banks are insolvent now, post default they would be solvent by definition) the ECB has a pretty strong defence:

"You're wrong. To the uneducated eye, it might appear we are in breach of our legal obligations, but as our lawyers are happy to explain we actually arent".

They then send their critics on a merry lap of the various EU treaties, guided by lawyers. By the time a conclusion is reached, the "facts on the ground" will already be established.

Lets face it, the liquidity support for the insolvent Irish banks (propped up by an insolvent state) is based entirely on wishful thinking and fantastical growth projections. The worst policy choices have been supported by simply making stuff up, ignoring the rules and pretending everything will turn out for the best. I dont see why correct policy choices cant be supported using a similar methodology, should a revolution of common sense suddenly break out.

...but in this case what they're saying is that they're (arguably, I suspect) outside their legal obligations or limits when accepting the collateral they currently accept, but that if people do things they don't like they'll stand on the letter of the law instead and withdraw the support they claim may not be legally 100% in the first place.

What you're saying is that you think they're bending the rules to allow what you regard as bad policy, so they could equally well bend them for good policy - and presumably they could do so, if they wished to do so.

cordially,
Scofflaw