Run on Banks, when's it going to happen here?

drunkmonkey

I know we had a run at the start of the crisis but the Euro Zone crisis has spilled over to the UK today with over 1 billion withdrawn yesterday.

Is my money safe with AIB with the bank guarantee scheme? I'm thinking I should put it somewhere else in case they go bang. I've got stung before with other businesses when they closed the doors.
Where should I put the money?

Any opinions?

Anita Blow

Country is still in a bad state but I think we're passed the run on the banks possibility at least.
As far as I know our banks have very little exposure to Greece

drunkmonkey

The UK banks are starting to run, it looks like Santandare is turning into northern rock as we speak. http://www.thisismoney.co.uk/money/markets/article-2146294/Stock-markets-flash-red-investors-gripped-fears-run-European-banks.html

baords dyslexic

You could always buy that boat?

Anita Blow

I'm no expert on this stuff but I'd say it's because Santander would have a large enough exposure to the Spanish Property crash. Also since it's a large, Europe-wide Bank it could have exposure to Greece.

I think the difference between ourselves and the UK is that our banks have gone through even stricter stress tests and have passed. The fact that they've passed these stress tests, have been recapitalised (so their balance sheets are in a much better position) and they have little to no exposure to Greece means that any Greek default would have no real effect on our banks.

It might have secondary effects like another credit crunch but it's not like they're lending anyway, and they've dealt with this situation before and survived.

Lantus

you'd ned to have a serious amount of cash, 5 or really 6 fig sums to be worried. I only have the few cent left from better times.....

Even so I doubt it will even come to that.

Defiler Of The Coffin

drunkmonkey wrote: »

I know we had a run at the start of the crisis but the Euro Zone crisis has spilled over to the UK today with over 1 billion withdrawn yesterday.

Is my money safe with AIB with the bank guarantee scheme? I'm thinking I should put it somewhere else in case they go bang. I've got stung before with other businesses when they closed the doors.
Where should I put the money?

Any opinions?

I don't think there has even been a full-scale run on the Greek Banks yet? Facebook are floating today if you want to spread some of your cash around!

liammur

drunkmonkey wrote: »

I know we had a run at the start of the crisis but the Euro Zone crisis has spilled over to the UK today with over 1 billion withdrawn yesterday.

Is my money safe with AIB with the bank guarantee scheme? I'm thinking I should put it somewhere else in case they go bang. I've got stung before with other businesses when they closed the doors.
Where should I put the money?

Any opinions?

Who cares if there's a run on our banks? BOI management doesn't. Nor do government finance ministers.

http://www.independent.ie/business/boi-bosses-move-29m-of-own-cash-out-of-bank-3053970.html

http://www.independent.ie/business/irish/noonan-steers-clear-of-ireland-with-own-money-2615030.html

mike65

There will only be a run on the banks if enough people are panicked into withdrawing money. Lets try to not be that stupid.

testicle

drunkmonkey wrote: »

I know we had a run at the start of the crisis but the Euro Zone crisis has spilled over to the UK today with over 1 billion withdrawn yesterday.

Is my money safe with AIB with the bank guarantee scheme? I'm thinking I should put it somewhere else in case they go bang. I've got stung before with other businesses when they closed the doors.
Where should I put the money?

Any opinions?

Give it to me.

Geuze

Huge amounts of deposits have already left Ireland.

See here:

http://namawinelake.wordpress.com/2012/05/11/reliance-on-central-bank-funding-by-irish-banks-stays-flat-in-april-2012/

drunkmonkey

baords dyslexic wrote: »

You could always buy that boat?

It's the money for the boat i'm worried about. No tax for 10 years if you start up in some caribbean islands at the moment, I'm so so tempted looking out here at the grey skies and drizzle.

Kensington

drunkmonkey wrote: »

I know we had a run at the start of the crisis but the Euro Zone crisis has spilled over to the UK today with over 1 billion withdrawn yesterday.

Is my money safe with AIB with the bank guarantee scheme? I'm thinking I should put it somewhere else in case they go bang. I've got stung before with other businesses when they closed the doors.
Where should I put the money?

Any opinions?

I don't see there being any great risk tbh. In saying that, I have my savings spread around amongst a number of banks/credit unions, based both here and elsewhere in Europe, aswell as some stock. Don't keep all your eggs in the one basket as they say!

Mr.Micro

mike65 wrote: »

There will only be a run on the banks if enough people are panicked into withdrawing money. Lets try to not be that stupid.

Sean Quinn got €3 billion from the banks some time ago, and has not paid it back, or it appears to have any intention of doing so. The rest of us pay for they likes of him no matter what country we are in, Ireland, Spain or Greece. I would not be surprised if there are any lessons learned by the banks here.

Black Swan

baords dyslexic wrote: »

You could always buy that boat?

testicle wrote: »

Give it to me.

drunkmonkey wrote: »

It's the money for the boat i'm worried about. No tax for 10 years if you start up in some caribbean islands at the moment, I'm so so tempted looking out here at the grey skies and drizzle.

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darkman2

OP, I have to say, I think it's very irresponsible to even have a thread like this. Bank runs are dangerous things. And once people get it wrongly into their heads that their money is not safe you could have a panic. That's what is happening in Greece right now though not a "run" more of a "jog". We really don't want any such movement developing here! And once talk of bank runs start it is so hard to get the genie back in the bottle. It can be a runaway train and everyone ultimately suffers the consequences.

Your money is fine. My money is fine. If people start withdrawing funds in bulk then our money is not safe. So why even ask?

liammur

darkman2 wrote: »

OP, I have to say, I think it's very irresponsible to even have a thread like this. Bank runs are dangerous things. And once people get it wrongly into their heads that their money is not safe you could have a panic. That's what is happening in Greece right now though not a "run" more of a "jog". We really don't want any such movement developing here! And once talk of bank runs start it is so hard to get the genie back in the bottle. It can be a runaway train and everyone ultimately suffers the consequences.

Your money is fine. My money is fine. If people start withdrawing funds in bulk then our money is not safe. So why even ask?

No. Discussion is good, Greeks are taking their money out because it's likely they will return to the drachma, which could be devalued by 50%.

Lantus

Theres no real run on the greek banks becuase most of the wealthy people have already moved the money elsewhere sometime ago.

The folks left are the day to day people with 'normal' accounts in that you get paid ad it's used up through the course of a month. Very hard to make a run on what isn't really there for very long as you need it to live on.

kennyb3

There won't be a run in Ireland - well not for a few years anyway. But there was pretty serious capital flight for most of last year.

I, for one have my wedge, nicely tucked up in a German bank and I know plenty more who have done similar.

stackerman

darkman2 wrote: »

OP, I have to say, I think it's very irresponsible to even have a thread like this. Bank runs are dangerous things. And once people get it wrongly into their heads that their money is not safe you could have a panic. That's what is happening in Greece right now though not a "run" more of a "jog". We really don't want any such movement developing here! And once talk of bank runs start it is so hard to get the genie back in the bottle. It can be a runaway train and everyone ultimately suffers the consequences.

Your money is fine. My money is fine. If people start withdrawing funds in bulk then our money is not safe. So why even ask?

Sorry darkman, but that is complete rubbish. The OP is only trying to look after his family (which is all we are really talking about) and he is well within his rights to bring up this topic. If others wish to keep their heads in the sand fine, but I'll happily discuss same with him.
Would you be happier if I discussed same via PM :rolleyes:

If you are lucky enough to have a few quid, I suggest you think on a bit.
No offence meant.

chris2008x

Honestly these state guarantees are just a laugh. Seriously how could the state afford to cover each individual saver up to a maximum of €100,000

They just said this in 2008 with no thought put into at all whatsoever. The truth is your money isn't safe but what is going on in Greece is no where near the situation we are in Ireland. Greece is seen as the most likely to leave the euro. Although I believe the situation could have been a lot better if we hadn't signed up for this euro jumping ship too early is a dangerous thing and Ireland leaving the euro isn't going to happen at least not in this decade.

FYI savers, when banks go bust it will always be the banks who lend to them that will be first in line for any payments during winding down. You the savers are bottom of the pyramid.

darkman2

stackerman wrote: »

I'll happily discuss same with him.
Would you be happier if I discussed same via PM :rolleyes:

Yes. The dynamic of a bank run mean it is not something anyone should ever be flippant about. The OP's fears are illogical - the banks are not in danger and his savings are safe. What would put his savings in danger is the message he is promoting.


If Joe Duffy (for example) on his radio show started talking about the safety of deposits in banks or the lack of it he would be taken off the air within minutes. And rightly so.

There is no fundamental problem with Irish banks when it comes to depositors. None at all. The OP's thread title is irresponsible and the message is dangerous if given a big enough, largely ignorant, audience. That's the problem - ignorance. People get scared. That's what prompts a run on a bank.

Farmer Pudsey

I think we should pick 3-4 branches monday morning and start withdrawing it would be real fun nothing like a bit of panic to get things going. Very easy to organise on FB or any discussion. Que of 20-30 people outside bank before an hour before opening talking loudly., rushing in demanding all there money in cash:D

By lunchtime

gally74

kennyb3 wrote: »

There won't be a run in Ireland - well not for a few years anyway. But there was pretty serious capital flight for most of last year.

I, for one have my wedge, nicely tucked up in a German bank and I know plenty more who have done similar.

Hello can you name the bank and steps?

Unrealistic

darkman2 wrote: »

Yes. The dynamic of a bank run mean it is not something anyone should ever be flippant about. The OP's fears are illogical - the banks are not in danger and his savings are safe. What would put his savings in danger is the message he is promoting.

I'm glad you're so certain about that. The Irish Central Bank takes a more nuanced view and Deutsche Bank is even less confident.
http://www.rte.ie/news/2012/0323/economy-business.html
http://www.bloomberg.com/news/2012-05-18/irish-banks-may-tip-state-into-bailout-2-deutsche-bank-says.html

darkman2 wrote: »

If Joe Duffy (for example) on his radio show started talking about the safety of deposits in banks or the lack of it he would be taken off the air within minutes. And rightly so.

Joe Duffy did do a program on this subject in late 2010. The government of the day were not happy but he wasn't taken off the air.

darkman2 wrote: »

There is no fundamental problem with Irish banks when it comes to depositors. None at all.

Except a huge bad debt problem that is accelerating rather than slowing.

darkman2 wrote: »

The OP's thread title is irresponsible and the message is dangerous if given a big enough, largely ignorant, audience. That's the problem - ignorance. People get scared. That's what prompts a run on a bank.

People get scared, certainly, but whether it is ignorance or justified concern is a separate question.

Technoprisoner

was there not a time limit on the bank gurantee made in 2008?

NIMAN

I've always wondered where do people put their money when they withdraw it from a bank?

Icepick

NIMAN wrote: »

I've always wondered where do people put their money when they withdraw it from a bank?

another bank not owned by the state, gold, shares...

darkman2

Unrealistic wrote: »

Except a huge bad debt problem that is accelerating rather than slowing.

That's rubbish. The banks still have increasing bad debts but it is not accelerating. It is the opposite.

touts

The problem isnt the stability of the banks. The banks are supported with lots of money and the signs are that support will continue. The problem is the money. People in Greece are taking their money out of the banks because they want it in Euro notes not some digital illusion of money in an account. They dont want to wake up one day and hear that all their money has been switched from Euros to Drachma on a 1 to 1 basis and then the Drachma falls by 60% in first day of trading in effect wiping out most of their savings. The banks still have the same number of units of a currency just a very devalued one. If people have euro notes then they can keep them safe and once things stabilise they head to Germany for a day and convert them to Drachma without losing the 60%.

There will be minor flows from banks here until we have a better idea of what currency we will have. If we are allowed to stay in the main Euro then there wont be a run. But if it looks like we are moving back to the punt or into a division 2 euro (us, greece, spain, italy, portugal, cyprus etc) then there will be a full run on the banks. Most sensible businesses have made plans on how to move ther money in a hurry if they need to. It is just like any disaster recovery plan. Hopefully they will never use it but better to have the plan rather than be running around like a headless chicken on the morning that it all comea down. Most sensible people sholud have a similar plan for their persoal savings.

Unrealistic

darkman2 wrote: »

That's rubbish. The banks still have increasing bad debts but it is not accelerating. It is the opposite.

From Bloomberg today.

Although resilient during 2009 and 2010, mortgage arrears have risen sharply over the past year

http://www.bloomberg.com/news/2012-05-18/irish-banks-may-tip-state-into-bailout-2-deutsche-bank-says.html

Quarterly Mortgage Arrears as reported by the Central Bank of Ireland
Dec 2010 5.7%
Mar 2011 6.3% (increased by 0.6%)
Jun 2011 7.2% (increased by 0.9%)
Sep 2011 8.1% (increased by 0.9%)
Dec 2011 9.2% (increased by 1.1%)

The rate of increase is growing therefore it is correct to say it is accelerating.

darkman2

That's mortgage arrears only. I'm talking about the overall bad debt position. Household and business debt - where are the figures?

Unrealistic

darkman2 wrote: »

That's mortgage arrears only. I'm talking about the overall bad debt position. Household and business debt - where are the figures?

The Central Bank doesn't provide figures for those that I can see. Mortgage arrears, the arrears for which figures are readily available, are clearly accelerating. You claim overall arrears are actually slowing. That is not only are non-mortgage arrears slowing in and of themselves but they are doing so to such an extant that the cancel out the acceleration in mortgage arrears. On what basis?

Scofflaw

Unrealistic wrote: »

The Central Bank doesn't provide figures for those that I can see. Mortgage arrears, the arrears for which figures are readily available, are clearly accelerating. You claim overall arrears are actually slowing. That is not only are non-mortgage arrears slowing in and of themselves but they are doing so to such an extant that the cancel out the acceleration in mortgage arrears. On what basis?

Please try to distinguish between 'accelerating' and 'fluctuating around a trend', and restrict your claim to the latter if you cannot prove the former.

moderately,
Scofflaw

Dwellingdweller

darkman2 wrote: »

Yes. The dynamic of a bank run mean it is not something anyone should ever be flippant about. The OP's fears are illogical - the banks are not in danger and his savings are safe. What would put his savings in danger is the message he is promoting.


If Joe Duffy (for example) on his radio show started talking about the safety of deposits in banks or the lack of it he would be taken off the air within minutes. And rightly so.

There is no fundamental problem with Irish banks when it comes to depositors. None at all. The OP's thread title is irresponsible and the message is dangerous if given a big enough, largely ignorant, audience. That's the problem - ignorance. People get scared. That's what prompts a run on a bank.

And who would take him off air? The Germans? :rolleyes: What you're saying is ridiculous, you can't stop people discussing these things if they want to. While I understand what you mean in that if enough people get the idea that their deposits are unsafe, they will 'run' to the bank, it still strikes me as a bit silly (and impossible to implement!) to stop people from discussing these things in the media and other places if they want to.

Unrealistic

Scofflaw wrote: »

Please try to distinguish between 'accelerating' and 'fluctuating around a trend', and restrict your claim to the latter if you cannot prove the former.

moderately,
Scofflaw

Agreed it could be argued that four data points is not enough to distinguish between acceleration and fluctuation around a trend although, on the face of it, the data I included did show an acceleration rather than fluctuation. If we take the entire history from when the Central Bank first started publishing these statistics it is even more clear that growth in arrears is accelerating.

30/09/2009 3.3%
31/12/2009 3.6% (increased by 0.3%)
31/03/2010 4.1% (increased by 0.5%)
30/06/2010 4.6% (increased by 0.5%)
30/09/2010 5.1% (increased by 0.5%)
31/12/2010 5.7% (increased by 0.6%)
31/03/2011 6.3% (increased by 0.6%)
30/06/2011 7.1% (increased by 0.8%)
30/09/2011 8.1% (increased by 1.0%)
31/12/2011 9.2% (increased by 1.1%)

I'm really not going out on a limb here. Only repeating what established commentators have already reported. As I quoted in my original post Deutsche Bank via Bloomberg yesterday reported that:

Although resilient during 2009 and 2010, mortgage arrears have risen sharply over the past year

http://www.bloomberg.com/news/2012-05-18/irish-banks-may-tip-state-into-bailout-2-deutsche-bank-says.html

NAMA Wine Lake's assessment when the most recent set of statistics was published was:

The figures show a progressively worse deterioration in arrears.

http://namawinelake.wordpress.com/2012/02/17/one-in-14-irish-mortgages-is-more-than-six-months-in-arrears-latest-statistics-show/

liammur

Unrealistic wrote: »

Agreed it could be argued that four data points is not enough to distinguish between acceleration and fluctuation around a trend although, on the face of it, the data I included did show an acceleration rather than fluctuation. If we take the entire history from when the Central Bank first started publishing these statistics it is even more clear that growth in arrears is accelerating.

30/09/2009 3.3%
31/12/2009 3.6% (increased by 0.3%)
31/03/2010 4.1% (increased by 0.5%)
30/06/2010 4.6% (increased by 0.5%)
30/09/2010 5.1% (increased by 0.5%)
31/12/2010 5.7% (increased by 0.6%)
31/03/2011 6.3% (increased by 0.6%)
30/06/2011 7.1% (increased by 0.8%)
30/09/2011 8.1% (increased by 1.0%)
31/12/2011 9.2% (increased by 1.1%)

I'm really not going out on a limb here. Only repeating what established commentators have already reported. As I quoted in my original post Deutsche Bank via Bloomberg yesterday reported that:
http://www.bloomberg.com/news/2012-05-18/irish-banks-may-tip-state-into-bailout-2-deutsche-bank-says.html

NAMA Wine Lake's assessment when the most recent set of statistics was published was:
http://namawinelake.wordpress.com/2012/02/17/one-in-14-irish-mortgages-is-more-than-six-months-in-arrears-latest-statistics-show/

This report would tend to agree with you:

THE spiralling mortgages crisis could trigger another multi-billion recapitalisation of our banks and force Ireland into a 'second bailout', German banking giant Deutsche claimed yesterday.
The damning 120-page note from Deutsche came on the same day that Citi warned that the recession was likely to force Ireland to apply for a second bailout. London-based Citi also pointed out, however, that they expect a second European bailout to remain available to Ireland even if the fiscal compact treaty fails.
The 'surviving' Irish banks got another €24bn capital in a mega bailout last summer, while Irish Bank Resolution Corporation (including Anglo Irish Bank and Irish Nationwide) has repeatedly said it won't need more cash.
Experts increasingly fear that Irish banks may actually need to be bailed out again because mortgages in particular are shaping up worse than even the 'adverse' scenario the banks are capitalised to deal with.
In its note, Deutsche said AIB, Bank of Ireland and Permanent TSB could lose "€2bn to €4bn" more on mortgages than what was provided in the stress tests that underpinned last summer's bailouts.

http://www.independent.ie/business/european/deutsche-fears-mortgage-crisis-to-force-second-irish-bailout-3112203.html

Scofflaw

Unrealistic wrote: »

Agreed it could be argued that four data points is not enough to distinguish between acceleration and fluctuation around a trend although, on the face of it, the data I included did show an acceleration rather than fluctuation. If we take the entire history from when the Central Bank first started publishing these statistics it is even more clear that growth in arrears is accelerating.

30/09/2009 3.3%
31/12/2009 3.6% (increased by 0.3%)
31/03/2010 4.1% (increased by 0.5%)
30/06/2010 4.6% (increased by 0.5%)
30/09/2010 5.1% (increased by 0.5%)
31/12/2010 5.7% (increased by 0.6%)
31/03/2011 6.3% (increased by 0.6%)
30/06/2011 7.1% (increased by 0.8%)
30/09/2011 8.1% (increased by 1.0%)
31/12/2011 9.2% (increased by 1.1%)

I'm really not going out on a limb here. Only repeating what established commentators have already reported. As I quoted in my original post Deutsche Bank via Bloomberg yesterday reported that:
http://www.bloomberg.com/news/2012-05-18/irish-banks-may-tip-state-into-bailout-2-deutsche-bank-says.html

NAMA Wine Lake's assessment when the most recent set of statistics was published was:
http://namawinelake.wordpress.com/2012/02/17/one-in-14-irish-mortgages-is-more-than-six-months-in-arrears-latest-statistics-show/

I think I'd agree with Namawinelake there - "a progressively worse deterioration in arrears". "Accelerating", I think, is a bit of a stretch - most people would take it as something rather more dramatic than the figures show.

You've also left out an important point:

At the end of September 2011, there are 773,420 private residential mortgage accounts held in the Republic of Ireland to a value of €114.4 billion. The stock of accounts continues to decline, from the 794,609 that were held at the end of September 2009. Of the current stock of accounts, 62,970, or 8.1%, are in arrears for more than 90 days. This compares with 55,763 accounts (7.2% of total) that were in arrears for more than 90 days at the end of June 2011.

The number of mortgages is declining. Now, mortgages in arrears are obviously not going to be amongst those paid off, and new mortgages are not being taken out at anything like the rate they're being paid off. So, while there is still a rise in the rate of increase, it's smaller than your figures show, as indeed is the underlying rate of mortgage arrears - because the % figure is the % of a declining number.

In case it's not clear what that means, imagine if everybody but the 62,970 problem mortgages from above paid off their mortgages. The figure for mortgages in arrears would then be 100%, although the overall situation has obviously improved massively!

cordially,
Scofflaw

kennM

What we have is just pure speculation which will naturally wildly vary based off opinion. People who dont understand the ins and outs (which is most, myself largely included) will stick and jump on what they think is the safest thing. But with much of these they can be self fulfilling prophesis...... Country/bank starts struggling to fix things, ratings agency downgrades making conditions harder for them to recover and its a downward spiral.

Lets look at history here..... Nobody saw the recession coming, nobody saw the property crash, even the people who speculated said worst case 30%. So we are now trying to predict harder things......

How many private depositors have been burnt to date by banks in the recession? None that i know of. Personally leaving my money put in bank. If people run the banks where do they leave cash? At home, burglars dream come true!

Plenty of money has left Greece. Things are coming to a climax regarding Greece staying in the euro or not. People want their hands on their money on the stronger currency because the drchma will be largely devalued.

If Greece does defult then the markets will go wobbly and cautious for quite a while. Personally i think this could lead us to a second bailout..... Its fear and perception. Not the fundamentals.

Personally i feel the timing of the austerity sucks.... To steal a statement from David McWilliams, we are basically putting an anorexic on a diet and expecting them to gain weight.

Unrealistic

Scofflaw wrote: »

I think I'd agree with Namawinelake there - "a progressively worse deterioration in arrears". "Accelerating", I think, is a bit of a stretch - most people would take it as something rather more dramatic than the figures show.

We're delving into semantics here surely? 'Progressively worse' (where 'worse' refers to an increase) is by definition an acceleration. Maybe it comes across as alarmist (although that wasn't my intention) but it is nevertheless accurate.

Scofflaw wrote: »

You've also left out an important point:

The number of mortgages is declining. Now, mortgages in arrears are obviously not going to be amongst those paid off, and new mortgages are not being taken out at anything like the rate they're being paid off. So, while there is still a rise in the rate of increase, it's smaller than your figures show, as indeed is the underlying rate of mortgage arrears - because the % figure is the % of a declining number.

In case it's not clear what that means, imagine if everybody but the 62,970 problem mortgages from above paid off their mortgages. The figure for mortgages in arrears would then be 100%, although the overall situation has obviously improved massively!

cordially,
Scofflaw

Agreed, that is a factor that needs to be considered although it is debatable how significant it is. Presuming many of those mortgages being paid down are those issued in the late eighties and early nineties running to the end of their term then, while their redemption decreases the number of mortgages outstanding, it has minimal impact on the total mortgage debt outstanding. If a mortgage reaches its term during a quarter then that is going to be one mortgage less in number but will probably reduce the total mortgage debt outstanding by less than €2k. But if a mortgage moves from performing to delinquent in a quarter that is also a change of one mortgage in terms of the number of mortgages but the resulting change in total mortgage debt outstanding is likely to be closer to €200k than €2k. (It is accepted that more recent mortgages are more likely to fall into arrears.) This criticism has been levelled at the Central Bank before (I think by NAMA Wine Lake and others) that their focus on the number of mortgages in trouble understates the real problem because the value of those mortgages in trouble is higher than the value of the average mortgage. The most recent stats show 9.2% of mortgages are in arrears, and this is the number the Central Bank focuses on, but these mortgages actually represent 12.3% of total mortgage debt outstanding.

Also, while we know mortgage balances have decreased over recent quarters, we do not know how much of that decrease is due to mortgages having been repaid and how much has been debt forgiveness/UK bankruptcy/other arrangements. This is important, getting back to the original point raised, because knowing how much of the €24 billion recapitalisation to cover mortgage losses is still available to cover the growing arrears (accelerating or otherwise) and how much has already been burned through is crucial in terms of evaluating the stability of our banks.

Unrealistic

kennM wrote: »

Lets look at history here..... Nobody saw the recession coming, nobody saw the property crash, even the people who speculated said worst case 30%. So we are now trying to predict harder things......

Not actually true. You quote McWilliams in your post and he predicted the property crash in 1999 and more forcefully in 2003. The ESRI argued that the economy, and especially property, was getting too frothy in 2000 but was shot down by Bertie and McCreevy. The Economist was calling a major bubble in Ireland in 2005. In 2007 Morgan Kelly predicted a worst case fall of 60%.

kennM wrote: »

How many private depositors have been burnt to date by banks in the recession? None that i know of. Personally leaving my money put in bank. If people run the banks where do they leave cash? At home, burglars dream come true!

It hasn't happened in Ireland but it has happened elsewhere in the EU. Depositors in Krajbanka in Latvia did get their state guaranteed €100k but lost anything in excess of that.

People can get very inventive when it comes to protecting their wealth when they lose trust in banks. There are plenty of alternatives besides under the mattress. If you're just worried about a particular bank then you move your balances to another bank. If you're worried about the banking system in your country then you move it to a bank in another country. If you're worried about the banking system internationally, or about a redenomination/devaluation, then you move it out of cash completely and into other assets. I don't doubt that some of the property purchases in Ireland in the last twelve months were at least partially motivated by this logic. The same with all the recent interest in gold etc.

I lived outside Ireland for the best part of two decades and worked in countries that have been through this before. I remember my surprise during a currency meltdown when people went crazy buying TVs, washing machines, cars, anything they could get their hands on. But it makes sense if you know your money is going to be worthless tomorrow to convert it into an asset, any asset, that you can use or sell.

Dannyboy83

kennM wrote: »

To steal a statement from David McWilliams, we are basically putting an anorexic on a diet and expecting them to gain weight.

I'm not surprised McWilliams said this:

An anorexic is someone who
A) Eats below their basal metabolic rate in order to lose weight
May also increase their energy expenditure in order to increase weight loss

In economic terms, that would be a country that spends less money than it earns and stimulates its economy to grow even more rapidly.

So in economic terms (and in eating disorders), we are the opposite.
We eat more than can burn off and take food from other people at the table so we can eat even more- i.e. We spend much more than we earn and borrow the difference.

And to make it worse, we are sacrificing lean muscle mass (capital spending) which actually causes the metabolic rate rate to slow even further thereby exasperating the dilemma we are in, while current spending in areas such as education has actually risen! - the idea being that we can try to fool ourselves by reaching a certain weight on the scales - while in reality it just means our body composition/economic composition is even worse than where we started and we are even more unhealthy.

That leaves two options:
A) Bring our eating/spending back in line with our basal metabolic rate/income in order to stop gaining weight/debt
Try somehow to increase our energy expenditure/stimulate our economy in order to burn off some of the accumulated fat/debt

It's pretty rare that someone can "recover" by doing enough of B, without doing a certain amount of A.

But anyway, this is the man who gave us the line "Germany is trying to do with banks, what it couldn't do with tanks" so I wouldn't have expected to him to portray the nutritional sides of things any more realistically than he does the economic side of things.

Francie Barrett

There can never be a run on a Eurozone bank, the ECB will always step in to provide liquidity. This is the reason why Irish banks didn't go under when there was a stampede out the door awhile back.

Low Energy Eng

Francie Barrett wrote: »

There can never be a run on a Eurozone bank, the ECB will always step in to provide liquidity. This is the reason why Irish banks didn't go under when there was a stampede out the door awhile back.

Ireland was small enough to backstop at the time, the problem is if there's one in Greece it can spread to Spain & Italy, the Euro project is unravelling as far as I can see.

Scofflaw

Low Energy Eng wrote: »

Ireland was small enough to backstop at the time, the problem is if there's one in Greece it can spread to Spain & Italy, the Euro project is unravelling as far as I can see.

Ireland's banks weren't all that small, though. And the likely bailout needs of Spain and Italy are within what the ESM can cope with.

cordially,
Scofflaw

Scofflaw

Unrealistic wrote: »

We're delving into semantics here surely? 'Progressively worse' (where 'worse' refers to an increase) is by definition an acceleration. Maybe it comes across as alarmist (although that wasn't my intention) but it is nevertheless accurate.

Yes, it's fundamentally just a question of nuance - "accelerating" conjures up a dramatic and runaway rate of increase, where "progressive" suggests something slower and steadier.

Unrealistic wrote: »

Agreed, that is a factor that needs to be considered although it is debatable how significant it is.

As per the numbers,really.

Unrealistic wrote: »

Presuming many of those mortgages being paid down are those issued in the late eighties and early nineties running to the end of their term then, while their redemption decreases the number of mortgages outstanding, it has minimal impact on the total mortgage debt outstanding. If a mortgage reaches its term during a quarter then that is going to be one mortgage less in number but will probably reduce the total mortgage debt outstanding by less than €2k. But if a mortgage moves from performing to delinquent in a quarter that is also a change of one mortgage in terms of the number of mortgages but the resulting change in total mortgage debt outstanding is likely to be closer to €200k than €2k. (It is accepted that more recent mortgages are more likely to fall into arrears.) This criticism has been levelled at the Central Bank before (I think by NAMA Wine Lake and others) that their focus on the number of mortgages in trouble understates the real problem because the value of those mortgages in trouble is higher than the value of the average mortgage. The most recent stats show 9.2% of mortgages are in arrears, and this is the number the Central Bank focuses on, but these mortgages actually represent 12.3% of total mortgage debt outstanding.

Good point. It would really be more meaningful to look at what proportion of the banks' loan books are affected.

Unrealistic wrote: »

Also, while we know mortgage balances have decreased over recent quarters, we do not know how much of that decrease is due to mortgages having been repaid and how much has been debt forgiveness/UK bankruptcy/other arrangements. This is important, getting back to the original point raised, because knowing how much of the €24 billion recapitalisation to cover mortgage losses is still available to cover the growing arrears (accelerating or otherwise) and how much has already been burned through is crucial in terms of evaluating the stability of our banks.

Sure. See, for example: http://www.irishtimes.com/newspaper/finance/2012/0516/1224316193530.html

Although I'll admit that the last three years have made me as wary of Irish financial journalism as of official forecasts and celebrity economists - I'd prefer to look at the figures myself.

cordially,
Scofflaw

kennM

Dannyboy83 wrote: »

I'm not surprised McWilliams said this:

An anorexic is someone who
A) Eats below their basal metabolic rate in order to lose weight
May also increase their energy expenditure in order to increase weight loss

In economic terms, that would be a country that spends less money than it earns and stimulates its economy to grow even more rapidly.

So in economic terms (and in eating disorders), we are the opposite.
We eat more than can burn off and take food from other people at the table so we can eat even more- i.e. We spend much more than we earn and borrow the difference.

And to make it worse, we are sacrificing lean muscle mass (capital spending) which actually causes the metabolic rate rate to slow even further thereby exasperating the dilemma we are in, while current spending in areas such as education has actually risen! - the idea being that we can try to fool ourselves by reaching a certain weight on the scales - while in reality it just means our body composition/economic composition is even worse than where we started and we are even more unhealthy.

That leaves two options:
A) Bring our eating/spending back in line with our basal metabolic rate/income in order to stop gaining weight/debt
Try somehow to increase our energy expenditure/stimulate our economy in order to burn off some of the accumulated fat/debt

It's pretty rare that someone can "recover" by doing enough of B, without doing a certain amount of A.

But anyway, this is the man who gave us the line "Germany is trying to do with banks, what it couldn't do with tanks" so I wouldn't have expected to him to portray the nutritional sides of things any more realistically than he does the economic side of things.

Hey Danny you've taken the flip side of the comment.... although still valid.

Anorexic comments... i.e. we're getting in less than we need, not enough income (taxes). The domestic economy creates jobs, employment, reduces unemployment and reduces expenditure (in a certain way). My increasing taxes/austerity you compromise demand in the domestic economy leading to further unemployment.... viscous circle. I personally feel our unemployment rate is kept artificially low due to emigration.

I do feel that the solution is a combination of both cuts and investment in high value areas.

I just annoys me that its nigh on impossible for government to find money for things like childrens hospital, jobs stimulus, etc. but if I bank sticks out its hand for billions its found in the blink of an eye and you and I have a bigger tax bill!

hatrickpatrick

This is one of the first things I'd change in terms of overhauling the monetary system: We need a system in which a bank run doesn't matter, as a bank has enough money to either be equal or more than the current sum of total deposits.

Sound ridiculous? It's actually not. There should be a type of bank which simply holds your money for you, completely separate from any lending business.
If you think it sounds impossible, that's because you're thinking within the parameters of the current financial and monetary system, which would be irrelevant if we're tearing that up and starting anew :P

A large number of people taking out their own money from banks, which they have every right to do, should not have the capability to put other depositors' money at risk. It's a bit ludicrous.

kennM

hatrickpatrick wrote: »

This is one of the first things I'd change in terms of overhauling the monetary system: We need a system in which a bank run doesn't matter, as a bank has enough money to either be equal or more than the current sum of total deposits.

Sound ridiculous? It's actually not. There should be a type of bank which simply holds your money for you, completely separate from any lending business.
If you think it sounds impossible, that's because you're thinking within the parameters of the current financial and monetary system, which would be irrelevant if we're tearing that up and starting anew :P

A large number of people taking out their own money from banks, which they have every right to do, should not have the capability to put other depositors' money at risk. It's a bit ludicrous.

Totally agree with you.... or have varied banks just like you have with stocks. i.e. bank A does not invest your money and you get 0% interest 100% guaranteed. Bank B will invest up to 20% of the deposits on hand and you can get return Y, Bank C will invest up to 40% of the deposts on hand and you can get a return of Z.

To date its almost a case of.... every bank will try to invest 110% of the deposits on hand, guarantee none of it and you get, as near as makes no difference, 0 interest. When we muck up we'll put our hands out to the government.

ardmacha

There should be a type of bank which simply holds your money for you, completely separate from any lending business.

Such a bank would have to charge you, whereas regular banks pay you interest.

kennM

ardmacha wrote: »

Such a bank would have to charge you, whereas regular banks pay you interest.

Most of them do, transaction fees.....