The whole economy/debt/"bankers" situation...

yawha

Are we literally paying billions to about 17 super rich owners of banks who sit around a round table in an ivory tower, wearing monocles, sipping champagne and eating caviar?

A lot of rhetoric I read seems to imply something like that...

And, hyperbole aside, if we were to "burn the bondholders", would anyone who doesn't already have at least a few million Euros stand to lose anything?

Apologies for naivety.

nesf

One main problem is that quite a few of those bonds are held by credit unions around the country and burning the bondholders would require us to potentially have to look after the credit unions' losses. That and undoubtedly some pension funds thrown in too most likely.

Bonds are held by quite ordinary groups, like your local credit union or someone you know's pension fund. This whole "it's just a rich circle of multi-millionaires" thing is a fallacy. The bond market is way more prosaic than that.

hatrickpatrick

David Drumm, the disgraced former exec of Anglo, has a seven figure pension.
The bank is insolvent. We are effectively paying this man, when he should be up in front of a judge over the hidden loans scandal instead.

He is just one example of the injustice the Irish people are faced with.

Hayte

What you are witnessing now is the latter stages of the starve the beast strategy. Except the beast didn't starve. It just borrowed tonnes of money from debt markets for the past 2 decades so now the beast dances to the movement of the debt market.

beeftotheheels

nesf wrote: »

One main problem is that quite a few of those bonds are held by credit unions around the country and burning the bondholders would require us to potentially have to look after the credit unions' losses. That and undoubtedly some pension funds thrown in too most likely.

Bonds are held by quite ordinary groups, like your local credit union or someone you know's pension fund. This whole "it's just a rich circle of multi-millionaires" thing is a fallacy. The bond market is way more prosaic than that.

Not to mention the other big holders of Irish bonds being domestic insurers and de Banks. If an Irish insurer goes bust then the Irish government will have to step in as with Quinn which means that we the taxpayers step in to protect the other taxpayers who have their insurance with that insurer.

Who used to own a big chunk of the insurers and banks? Domestic pension funds (only they're already had their losses on the banks because we've cut them out of the loop and now we own the banks directly).

And then more of our bonds are pledged to the Central Bank of Ireland in return for liquidity by the banks.

So there are undoubtedly distressed debt funds out there sitting on our bonds. How many of them is any ones guess. But the numbers from Greece suggested 30% of Greek bonds were held by Greek investors being pension funds, banks and insurers (according to the new PM).

30% by official investors (IMF/ EU/ ECB).

40% is held by financial institutions. That 40% would be lower in our case because relatively speaking we didn't have that many bonds until we took the bailout so we have a higher proportion of official creditors that Greece does at this stage. Of that 40% a significant number are being held by the banks of the countries lending us money (mostly the UK in our case, and of those the largest holder is RBS in which the UK Government owns a majority stake).

So it is complicated, but generally you will find pension funds at the back of it, Irish pension funds, British pension funds, or banks that other countries will have to bail out, or even ourselves as taxpayers in the case of the Irish banks and Irish Central Bank.

So I guess to sum it up burning bondholders is not a victim less crime.

hmmm

"Burn the bondholders" is a short term move with long term disadvantages. Most immediate problem is we are still having to borrow money, so burning the people you are borrowing from is not a good strategy. In the longer term, the government has made the judgement that our good name as people who pay our debts is better than some short term move, and it's a judgement I agree with.

I'm not aware of any country that has simply walked away from its debts, that impression is sometimes given. Even Argentina has had to pay back a large proportion of the debts it defaulted on.

Our problem isn't banks, it's the massive deficit we are running to pay our PS wages and social welfare costs. We're currently paying little or nothing on the bank debts, and with luck and good negotiating we may be able to continue like this long into the future.

WhatNowForUs?

'IF'we managed to get our own **** together i.e. balanced our budget could we then burn the bondholders without extensive consequences?

hmmm

WhatNowForUs? wrote: »

'IF'we managed to get our own **** together i.e. balanced our budget could we then burn the bondholders without extensive consequences?

It would probably mean that any future borrowing would be more expensive (some say that wouldn't be the case, experience elsewhere says it would). We also need a massive amount of funding for our banks, so they'd collapse as well. Plus, we'd lose our "good name" which could have unknown consequences e.g. would foreign investment be affected.

There's endless threads on here previously discussing the pros and cons, safe to say that at the very least a unilateral default leads to some huge unknowns.

nesf

WhatNowForUs? wrote: »

'IF'we managed to get our own **** together i.e. balanced our budget could we then burn the bondholders without extensive consequences?

Our budget being balanced doesn't really change much about the consequences of burning the bondholders. It all comes down to how much of the bonds are owned by funds that specialise in risky debt and how many are held by credit unions, pension funds and so on. The former can take a hit without it being "out problem" for the most part, the latter on the other hand would be very much a problem for us and our people.

Without knowing the numbers it's extremely risky to be calling for the bondholders to be burned.

beeftotheheels

WhatNowForUs? wrote: »

'IF'we managed to get our own **** together i.e. balanced our budget could we then burn the bondholders without extensive consequences?

Yes, in a simple universe. No in the universe that we live in. The "If" has to encompass not running a budget deficit again, not this year, or next, but for the next 10-20 years (if not more) because we could be locked out of the markets for that time (based on Argentina still being locked out). On top of that it also means that Irish companies, banks or otherwise, have no need to borrow money on commercial terms, because if we get a bad name then companies flying our flag get the same name.

If Ireland as a sovereign gets a name for disregarding international law relating to creditors, we run the risk of Irish companies getting tarnished with the same brush.

An interesting note is the fact that apparently, Greece can only buy oil off Iran at the moment.. So if we burned the bondholders we too might have difficulty buying oil unless we had cold hard cash up front, and only a fool pays for their oil before they take delivery of it (Pirates could get it, the ship could blow up/ sink, whatever), but burning the bondholders could force us into that position.

Crazy Horse 6

The rich get richer and the poor become poorer. Nothing changes or ever will. Accept it or protest.