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Realistic Economy News thread

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  • Closed Accounts Posts: 21,727 ✭✭✭✭Godge


    Despite all this, Iceland was right to let the banks fail. Ireland postponed the pain of letting its banks fail but the cost of doing so will be astronomical.
    The fact that Ireland has to borrow to supplement developers is one of the early indicators that Ireland was wrong to bail out its banks. Iceland`s booming construction sector fueled by inward investment shows they were right.

    It was not possible for Ireland to adopt the Iceland solution as that would have ended FDI, the main pillar of our economy.

    As for Iceland's construction boom, people can't take their money out of Iceland because of capital controls so the domestic economy is artificially supported and if that is going into a property boom, we know where that ends up.


  • Registered Users Posts: 16,686 ✭✭✭✭Zubeneschamali


    Money should be backed by gold or other commodities.

    Say "Hi" to the nineteenth century for us.


  • Registered Users Posts: 8,424 ✭✭✭Markcheese


    [quote="realitykeeper;9743711

    Money should be backed by gold or other commodities. Nothing is backing the Euro, Dollar, Yen or Sterling.[/quote]

    Is gold any more valuable than concrete or steel -? Or a patent or a brand ? It's a hedge against financial termoil - but it's main value is it's scarcity - why should a currency be backed by gold (or silver) and not butter or computer chips -

    Slava ukraini 🇺🇦



  • Closed Accounts Posts: 518 ✭✭✭mjv2ydratu679c


    Markcheese wrote: »
    Is gold any more valuable than concrete or steel -? Or a patent or a brand ? It's a hedge against financial termoil - but it's main value is it's scarcity - why should a currency be backed by gold (or silver) and not butter or computer chips -

    Rather have it backed by butter or computer chips than a promise, which its currently backed by


  • Registered Users Posts: 12,468 ✭✭✭✭Sand


    The cost of saving AIB & BOI was much cheaper than letting them die & refunding deposits layer.

    Irish people have over €90bn on deposit, almost all of it which is with the 2 big banks.

    Seems you are actually in favour of the state taking a larger burden to suit yourself?
    Odd.

    Much cheaper for who? I'm not someone who has accounts with AIB and BOI. Why should I be penalised to bail out your mistakes?

    The reality is that the burden of bailing out the AIB and BOI (and Anglo Irish and Nationwide) was not taken on by those who had made the choices that led to their failure. Nor was it borne by those who voted in the wrong government, or who had looked the other way, or who had "all partied". It certainly wasn't taken on by our European partners. It was passed onto future generations who will be paying for this mess for decades. Having learnt absolutely nothing the current generation are busy trying to re-inflate a property bubble and claim backpay in union pay deals.

    So much for all the high talk about moral hazard.


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  • Registered Users Posts: 12,248 ✭✭✭✭BoJack Horseman


    Sand wrote: »
    Much cheaper for who?

    Ireland.

    The cost of buying BOI & AIB shares is certainly cheaper than letting those banks disappear.

    Something like 3/4 of all Irish people have at least one account with either of these banks.

    Once the 2 banks are re-privatised the net cost of saving millions of peoples savings will be more than worth it.


  • Closed Accounts Posts: 8,101 ✭✭✭Rightwing


    newacc2015 wrote: »
    The whole point of QE is to create inflation. Look at the state of the Japenese economy. No inflation or deflation like we have destroys an Economy beyond repair. What good is controlling inflation(which isnt an issue), if we dont have Economic growth in the long term

    You are failling to see what an American version of a failed bank is. You would have had zero savings after it. It destroys long term confidence in Banks. There is thousands of Italian who dont trust the safety of their banks and have safety deposit boxes full of Cash in Switzerland. If there is no money in Banks, loans cant be created

    Or to create a stock market bubble. ;)
    What good is inflation without wage inflation? QE won't achieve that.
    The central banks are wrong. Inflation is not good it is bad. Consumers like prices to fall not rise. The only reason the central banks want the economy to have 2% inflation is because they think it will encourage more people to spend instead of save. That is not much of a plan.

    Money should be backed by gold or other commodities. Nothing is backing the Euro, Dollar, Yen or Sterling.

    Correct.
    Central banks are inept and looking for the easy solution. Problem now is, the easy solution looks permanent as market participants are hooked, until complete meltdown.


    Sand wrote: »
    Much cheaper for who? I'm not someone who has accounts with AIB and BOI. Why should I be penalised to bail out your mistakes?

    The reality is that the burden of bailing out the AIB and BOI (and Anglo Irish and Nationwide) was not taken on by those who had made the choices that led to their failure. Nor was it borne by those who voted in the wrong government, or who had looked the other way, or who had "all partied". It certainly wasn't taken on by our European partners. It was passed onto future generations who will be paying for this mess for decades. Having learnt absolutely nothing the current generation are busy trying to re-inflate a property bubble and claim backpay in union pay deals.

    So much for all the high talk about moral hazard.

    BOI has returned all cash to the State plus surplus. AIB in time will pay back the lion's share of its debts.

    The rest of your post is spot on.


  • Registered Users Posts: 12,468 ✭✭✭✭Sand


    Ireland.

    I'm not Ireland. It wasn't cheaper for me. Cheaper for you maybe, but why should I bail you out of your poor choices?
    Something like 3/4 of all Irish people have at least one account with either of these banks.

    And more than 3/4 of all Irish people probably have a mortgage but I don't see why I should bail them out of that either.


  • Registered Users Posts: 12,248 ✭✭✭✭BoJack Horseman


    Sand wrote: »
    It wasn't cheaper for me.
    How much exactly?
    I mean impericaly, how much did the governments purchase of their stakes in AIB & BOI cost you, in 2014 for example? (or any year if you prefer)

    but why should I bail you out of your poor choices?
    I've one savings account & one current account.
    My savings account was set up when I was 7 with £40 of my communion money.
    My current account was set up when I started secondary school cos they BOI gave a snazzy wallet for every student account set up!

    Poor choices?
    Get a grip of yourself.

    Millions of regular Joe's & Mary's have their life savings, their business, their wages in their savings & current accounts.

    Equating the people of Ireland with some sort of hedge-fund sharks is frankly moronic..... genuinely, utterly stupid.
    And saving these 2 banks was absolutely the right thing to do.



    And more than 3/4 of all Irish people probably have a mortgage but I don't see why I should bail them out of that either.
    there are 700,000 mortgages in Ireland, you arent bailing any homeowner out there either... unless you have sums to the contrary (just like you will provide for the above)


  • Registered Users Posts: 4,138 ✭✭✭realitykeeper


    Ireland.

    The cost of buying BOI & AIB shares is certainly cheaper than letting those banks disappear.

    Something like 3/4 of all Irish people have at least one account with either of these banks.

    Once the 2 banks are re-privatised the net cost of saving millions of peoples savings will be more than worth it.
    The cost of bailing out the banks was far more expensive than letting them fail.

    Had the banks failed, Ireland would not have been able to accumulate more debt with interest to pay back. Everyone with a mortgage would have had the mortgage written off. Everyone without (and with) a mortgage would not have to pay taxes or suffer the cutbacks associated with paying bank debt.

    The big losers would have been the shareholders and creditors who would have got perhaps a few cent in the euro back because the banks they owned choose to burn the savers. They would not even have got the bank buildings as all bank assets would have been seized to begin the process of refunding the savers.

    Of course, the short term hardships would have been politically unpopular which is the real reason the government cowardly did the wrong thing and saved themselves by enslaving current and future generations.


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  • Closed Accounts Posts: 1,991 ✭✭✭sword1


    Are you sure everyone with a mortgage would have had it written off, I presumed the loans would have been sold off to another company as part of the liquidation of the assets same as the properties


  • Registered Users Posts: 4,138 ✭✭✭realitykeeper


    sword1 wrote: »
    Are you sure everyone with a mortgage would have had it written off, I presumed the loans would have been sold off to another company as part of the liquidation of the assets same as the properties

    Yes I am sure. The mortgages would have been written off like in Iceland.

    This 30 sec video shows the Icelandic public applauding the decision:

    https://www.youtube.com/watch?v=NABKMc7OKqY

    Admittedly, the Icelandic government didn`t want to do it because they wanted to be able to borrow so they could feather their own nests, buy the next election etc, but the Icelandic people insisted on it as retaliation against the banks for burning savers.


  • Registered Users Posts: 2,497 ✭✭✭ezra_pound


    Reality keeper deserves the Looney left administration he idealises. He could do with a good dose of Gerry IRA Adams justice and equality and some Boyd Barrett social welfare.

    The sane, hard working, educated people of this nation however deserve much better.


  • Registered Users Posts: 373 ✭✭ibstar


    I've been reading a lot of news lately both local and from abroad, and this created a lot "noise" in my thought process regarding our own economy.

    On one side I read and hear that everything is changing for the better, and on the other side it's the opposite.

    We're told that the unemployment rate is falling, but we're constantly shown that not all is good with various taxes and constrains in the financial realm.

    Considering how things are moving, where will Ireland be in 10,20 or more years into the future?

    Will EU pressure us hard enough to raise our corp. taxes? Will an increase in tax cause LMCs to leave?

    At the rate we're recovering/going (very vigorously and fast compared to our counterparts), how long/much do we have left t fully recover?

    How long are we going to see our friends,neighbors and relatives leave to Canada, Australia and US?


  • Registered Users Posts: 4,138 ✭✭✭realitykeeper


    ezra_pound wrote: »
    Reality keeper deserves the Looney left administration he idealises. He could do with a good dose of Gerry IRA Adams justice and equality and some Boyd Barrett social welfare.

    The sane, hard working, educated people of this nation however deserve much better.

    Tá Tú mi-ceart. True right wingers like me know the banks should have been allowed to fail. You are the looney leftist who thinks it was a good idea to splash out a hundred billion saving other people from their bad decisions for no reason whatsoever.

    The only consequence of letting the banks fail would have been an inability to borrow which by the way would have been a very good thing in itself.


  • Closed Accounts Posts: 21,727 ✭✭✭✭Godge


    Yes I am sure. The mortgages would have been written off like in Iceland.

    This 30 sec video shows the Icelandic public applauding the decision:

    https://www.youtube.com/watch?v=NABKMc7OKqY

    Admittedly, the Icelandic government didn`t want to do it because they wanted to be able to borrow so they could feather their own nests, buy the next election etc, but the Icelandic people insisted on it as retaliation against the banks for burning savers.

    They didn't write off every mortgage in Iceland. They wrote off a portion of the mortgages after they had imposed penal rates of interest on them. The ordinary person in Iceland who had a mortgage got hammered.


  • Registered Users Posts: 4,138 ✭✭✭realitykeeper


    Godge wrote: »
    They wrote off a portion of the mortgages ...

    The "portion" you are referring to is the vast bulk of the mortgages. The only thing the mortgage holders had to pay for the cost of reimbursing savings which were lost when the banks defaulted. Of course, the mortgage holders had lost savings themselves so in a way they were repaying themselves. The defaulting banks got nothing from the mortgage holders. They did get phone calls, demands and reminders to pay the Icelandic savers :)


  • Registered Users Posts: 2,458 ✭✭✭OMD


    The "portion" you are referring to is the vast bulk of the mortgages. The only thing the mortgage holders had to pay for the cost of reimbursing savings which were lost when the banks defaulted. Of course, the mortgage holders had lost savings themselves so in a way they were repaying themselves. The defaulting banks got nothing from the mortgage holders. They did get phone calls, demands and reminders to pay the Icelandic savers :)

    I also thought it was only a portion of mortgage debt:

    "Despite overwhelming criticism from international financial institutions, Iceland’s government (formed after the April 2013 election) announced in November that it will be writing off up to 24,000 euro ($32,600) of every household’s mortgage, fulfilling its election promise. The government said the debt relief will be spread out over four years and will begin by mid-2014; and the prime minister has promised that public finances will not be put at risk.
    According to estimates, the measure is set to cost $1.2 billion in total, reduced by 13 percent on average. "


  • Registered Users Posts: 4,138 ✭✭✭realitykeeper


    100% of Icelandic mortgages were written off from the banks perspective. I think it was upwards of 80% that was written off from the mortgage holders perspective and that was for replenishing Icelandic savings accounts (not for bailing out foreign based bond holders).

    What is now abundantly clear is that Iceland were right to let their banks fail. The Irish, being slow to learn, will need more time to know this.


  • Registered Users Posts: 2,458 ✭✭✭OMD


    100% of Icelandic mortgages were written off from the banks perspective. I think it was upwards of 80% that was written off from the mortgage holders perspective and that was for replenishing Icelandic savings accounts (not for bailing out foreign based bond holders).

    Can you provide evidence of this because I can't.
    https://www.rt.com/business/iceland-banks-collapse-crisis-405/

    "Despite overwhelming criticism from international financial institutions, Iceland’s government (formed after the April 2013 election) announced in November that it will be writing off up to 24,000 euro ($32,600) of every household’s mortgage, fulfilling its election promise. The government said the debt relief will be spread out over four years and will begin by mid-2014; and the prime minister has promised that public finances will not be put at risk."

    "S&P estimated that Iceland's proposed mortgage debt relief program will have a cumulative fiscal cost of about 6 percent of GDP over the next four years. It is expected that the government will finance the program through increased taxation and not higher deficits."


    How about this
    http://wizbangblog.com/2012/04/14/did-iceland-forgive-the-majority-of-its-citizens-mortgage-debt/
    "Did Iceland forgive the majority of its citizens’ mortgage debt?"

    Worth reading I think. Spoiler alert: Iceland didn't forgive the majority of its citizens’ mortgage debt


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  • Registered Users Posts: 13,702 ✭✭✭✭BoatMad


    The central banks are wrong. Inflation is not good it is bad. Consumers like prices to fall not rise. The only reason the central banks want the economy to have 2% inflation is because they think it will encourage more people to spend instead of save. That is not much of a plan.

    Money should be backed by gold or other commodities. Nothing is backing the Euro, Dollar, Yen or Sterling.

    I know " reality keeper" , and that new fangled invention, the motor car, sure that will never catch on neither. People should never travel faster then the speed of a horse

    Deflationary economies are a disaster , real wages fall, business's fail and the economy collapses. But that all right , cause misses miggens just saved 2 cents on a packet of cornflakes


  • Registered Users Posts: 13,702 ✭✭✭✭BoatMad


    Sand wrote: »
    Much cheaper for who? I'm not someone who has accounts with AIB and BOI. Why should I be penalised to bail out your mistakes?

    The reality is that the burden of bailing out the AIB and BOI (and Anglo Irish and Nationwide) was not taken on by those who had made the choices that led to their failure. Nor was it borne by those who voted in the wrong government, or who had looked the other way, or who had "all partied". It certainly wasn't taken on by our European partners. It was passed onto future generations who will be paying for this mess for decades. Having learnt absolutely nothing the current generation are busy trying to re-inflate a property bubble and claim backpay in union pay deals.

    So much for all the high talk about moral hazard.

    The tax payer is on course to make a fine gain from the money " invested " into the main pillar banks.

    Anglo and IP are write offs, that use a money printing excercise, all we will in reality pay there is the interest and most of that interest costs Mrs back via the profits and of the CDI to the state. The promissory money is essentially free ( which is the case in a fiat currency anyway )

    The main use of austerity and increased taxes was to close the spending gap between the states day to day spending and its poor tax strategies pre 2008.

    Bit of course listen to the punters that still cry on about ' bailouts " and tax payers bailing out banks


  • Closed Accounts Posts: 8,101 ✭✭✭Rightwing


    BoatMad wrote: »
    The tax payer is on course to make a fine gain from the money " invested " into the main pillar banks.

    Anglo and IP are write offs, that use a money printing excercise, all we will in reality pay there is the interest and most of that interest costs Mrs back via the profits and of the CDI to the state. The promissory money is essentially free ( which is the case in a fiat currency anyway )

    The main use of austerity and increased taxes was to close the spending gap between the states day to day spending and its poor tax strategies pre 2008.

    Bit of course listen to the punters that still cry on about ' bailouts " and tax payers bailing out banks

    I wouldn't be so sure about this in AIB's case. Furthermore, one must always consider the opportunity cost lost with an investment (AIB), and over €1 bln ploughed into propping up their pension scheme.


  • Closed Accounts Posts: 6,363 ✭✭✭KingBrian2


    100% of Icelandic mortgages were written off from the banks perspective. I think it was upwards of 80% that was written off from the mortgage holders perspective and that was for replenishing Icelandic savings accounts (not for bailing out foreign based bond holders).

    What is now abundantly clear is that Iceland were right to let their banks fail. The Irish, being slow to learn, will need more time to know this.

    I have a different interpretation, we have no idea what a Iceland style bank run would have been like for us. Looking across at the disaster with Northern Rock it not unlikely we would have had that version of a bank run instead.

    Too many people are looking at one instance of a bank run that still caused Iceland harm when you look at other examples throughout history including Argentina, Scotland, Russia, Greece, Portugal, Spain, Britain and the US we fared a lot better in terms of regaining control of the banks.


  • Registered Users Posts: 13,702 ✭✭✭✭BoatMad


    Rightwing wrote: »
    I wouldn't be so sure about this in AIB's case. Furthermore, one must always consider the opportunity cost lost with an investment (AIB), and over €1 bln ploughed into propping up their pension scheme.

    AIB feel they will return a net gain , so they are probably in the best place to know .

    The bank capitalisation process will result in net returns. The promissory note will be rolled over for ever. In reality the bailout coat the tax payer little. The main area that cost the tax payer was closing the exchequer deficit , something that would have to have been done irrespective of bank failures


  • Closed Accounts Posts: 8,101 ✭✭✭Rightwing


    BoatMad wrote: »
    AIB feel they will return a net gain , so they are probably in the best place to know .

    The bank capitalisation process will result in net returns. The promissory note will be rolled over for ever. In reality the bailout coat the tax payer little. The main area that cost the tax payer was closing the exchequer deficit , something that would have to have been done irrespective of bank failures

    AIB also felt they were very well capitalised and would withstand the crisis. So much so, they felt compelled to raise the interim dividend. Market participants knew otherwise and made a packet short selling them.

    http://www.irishtimes.com/business/aib-defies-downturn-by-plan-to-raise-dividends-1.925628


  • Registered Users Posts: 4,138 ✭✭✭realitykeeper


    KingBrian2 wrote: »
    ... we fared a lot better in terms of regaining control of the banks.

    People keep saying that but the physical burden of bailing out the banks is only being postponed by the abundance of liquidity and ultra low interest rates, neither of which are sustainable.


  • Registered Users Posts: 4,138 ✭✭✭realitykeeper


    On the topic of rent controls, I read yesterday that landlords will only be allowed to up their rent every two years. That may work as a policy for the time being but what about when the policy of QE fails and hyperinflation causes prices to skyrocket? Landlords would be forced to stay on the same income for up to two years despite massive increases in the cost of living. Renting property has suddenly become extremely risky in my opinion.


  • Closed Accounts Posts: 1,991 ✭✭✭sword1


    Qe is meant to bring inflation, I presume you mean when it succeeds as it is failing at the moment, 2 years is not that long really, you would probably get the going rate for the first year and maybe below it after, it would give stability to the market


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  • Registered Users Posts: 4,138 ✭✭✭realitykeeper


    sword1 wrote: »
    Qe is meant to bring inflation, I presume you mean when it succeeds as it is failing at the moment, 2 years is not that long really, you would probably get the going rate for the first year and maybe below it after, it would give stability to the market

    No. I meant what I said. Yes the intended aim of QE is to increase inflation to close to (but under) 2%. However, as long as the markets believe this, the stagnation will continue, like slow strangulation. When the markets eventually realize that the policy of stimulus remains the only thing preventing economic collapse in Europe then the true risks attached to European bonds will force interest rates to increase quickly and this will result in a massive increase in the number of euros in existence which will cause the value of the Euro to plummet i.e. hyperinflation.

    That said, I think the initial spark may be with the US. Although this could happen anytime, I suspect China and Russia would prefer if it did not happen until after the completion of the trans Siberian oil pipeline to China in 2018. Once that is in place, China will promptly devalue its currency and raise its interest rates causing a stock market crash in the west. To save the stock markets, the FED and ECB will embark on an unprecedented level of QE which will cause a collapse in the value of the US dollar and the Euro. Hence hyperinflation.

    China will use its self inflicted recession to accelerate the process of populating its new cities and becoming a service led economy.


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