Re Ireland Banking crisis 2008

padd b1975 · 27-04-2019 01:13PM

Gloomtastic! wrote: »

The opportunity was there when FG got into power but they bottled it.

Yeah, we were much better off with 15% unemployment and massive budget deficits.

gjim · 27-04-2019 01:21PM

bells of shandon wrote: »

Most people do not understand what money is.

Why does everyone who's half digested some MMT nonsense on the web suddenly thinks that nobody else understands money?

bells of shandon wrote: »

A Nation without its own currency can go bankrupt. A Nation like the UK or USA,jAPAN etc can never run short of money, it creates it.

What about a "nation" like Venezuela or Zimbabwe? Seems there's no shortage of "money" but there's no food, fuel or toilet roll. I guess they can make soup of the bank notes.

Sure I don't know why any of us bother working at all, the government can just create money and hand it around. :rolleyes:

bells of shandon wrote: »

Ireland has never had control of its own currency from its founding in 1921.
Michael Collins negotiated in the Treaty an autonomous currency for the Free State (as then).
The Irish currency was pegged to the British Sterling (on his death)'
.This removed the ability of Ireland to invest and forge a strong economy and is the reason for the stagnant years from 1921- 70's.

We unpegged from sterling in the 70s and things got worse - 80's inflation and unemployment. The modern "boom" occurred from the early 90s AFTER we had joined the ERM - i.e. pegged the punt to the ECU.

The problem with MMT is that it doesn't stand up to even 10 seconds of critical thinking. Otherwise it'd be great...

EmmetSpiceland · 27-04-2019 01:30PM

amcalester wrote: »

More likely to have turned out worse.

Look at Greece.

Thought the Greek’s issue was more down to a lack of desire for paying taxes.

Mad_maxx wrote: »

Not entirely true, saving bond holders of all grades was pretty unprecedented but the combined forces of Timothy Geithner and Jean Claude Trichet, ensured the Irish tax payer picked up the tab for those who bought risk assets

We could never have avoided the entire bill but covered far too wide

Was that call not made on Peter Sutherland’s advice?

Franz Von Peppercorn · 27-04-2019 01:34PM

gjim wrote: »

Why does everyone who's half digested some MMT nonsense on the web suddenly thinks that nobody else understands money?

What about a "nation" like Venezuela or Zimbabwe? Seems there's no shortage of "money" but there's no food, fuel or toilet roll. I guess they can make soup of the bank notes.

Sure I don't know why any of us bother working at all, the government can just create money and hand it around. :rolleyes:

We unpegged from sterling in the 70s and things got worse - 80's inflation and unemployment. The modern "boom" occurred from the early 90s AFTER we had joined the ERM - i.e. pegged the punt to the ECU.

The problem with MMT is that it doesn't stand up to even 10 seconds of critical thinking. Otherwise it'd be great...

MMT applies to reserve currencies, or at least to the currencies of major economic powers. Not that necessarily agree or disagree with it. That said QE was once exotic.

Money is created in the most part by retail banks.

Wanderer78 · 27-04-2019 01:37PM

Franz Von Peppercorn wrote:

Money is created in the most part by retail banks.

Its great to see the growing awareness of this

gjim · 27-04-2019 03:22PM

Franz Von Peppercorn wrote: »

MMT applies to reserve currencies, or at least to the currencies of major economic powers. Not that necessarily agree or disagree with it. That said QE was once exotic.

Money is created in the most part by retail banks.

Generally, I think arguing about MMT is futile. For me, MMT is the alternative medicine of economics. Appealling in theory but with no empirical evidence to support it. If it were so easy for governments to ensure full employment by printing money, then there would surely be an example of this happening sometime in history, somewhere in the world. It's not like politicians wouldn't be falling all over themselves to print money if it worked. Instead we have lots of examples of countries destroying their economies by the same mechanism.

And strictly speaking money is not created by retail banks. One of several measures of money supply, M2, is increased by the lending activities of retail banks in aggregate. M2 measures available balances but not debt - it's a useful measure but not the only one. If we both simulataneously lent each other a grand, then M2 would increase by 2000 but neither of us would be really any richer.

paw patrol · 27-04-2019 04:16PM

MrFresh wrote: »

Similar sentiment was going around about Brexit. The EU didn't blink. UK is in a shambles.

I agree it is similar stuff but different in the case of Brexit. EU didn't blink cos the UK didn't actually try and leave.
May brought a crap deal to parliament and split parliament.

Had May said it was a **** deal and we're leaving on WTO rules and said come back to me with something better and actually had the fortitude to leave. I suspect it would have been different.

But who know tbh? We'll never know really

10pennymixup · 27-04-2019 04:22PM

MrFresh wrote: »

Organised by who?

The Illuminati ......Sssssh!!:rolleyes:

Franz Von Peppercorn · 27-04-2019 06:09PM

gjim wrote: »

Generally, I think arguing about MMT is futile. For me, MMT is the alternative medicine of economics. Appealling in theory but with no empirical evidence to support it. If it were so easy for governments to ensure full employment by printing money, then there would surely be an example of this happening sometime in history, somewhere in the world. It's not like politicians wouldn't be falling all over themselves to print money if it worked. Instead we have lots of examples of countries destroying their economies by the same mechanism.

And strictly speaking money is not created by retail banks. One of several measures of money supply, M2, is increased by the lending activities of retail banks in aggregate. M2 measures available balances but not debt - it's a useful measure but not the only one. If we both simulataneously lent each other a grand, then M2 would increase by 2000 but neither of us would be really any richer.

neither of us is creating money when we lend it to each other, nor does the money supply increase. If my bank account starts with 10k it ends with 10k as does yours. M2 (and all the Ms higher) stay the same.

Banks do create money when they loan. A loan doesn’t come from deposits or reserves as people think.

Franz Von Peppercorn · 27-04-2019 06:19PM

Wanderer78 wrote: »

Its great to see the growing awareness of this

Nope. Still you and me.

gjim · 27-04-2019 06:50PM

Franz Von Peppercorn wrote: »

neither of us is creating money when we lend it to each other, nor does the money supply increase. If my bank account starts with 10k it ends with 10k as does yours. M2 (and all the Ms higher) stay the same.

I probably didn't make that example very clear but the only difference is that the balances (money owed to each other) is recorded by a retail bank somewhere.

If both of us have 20k in our bank accounts but each owe 10k, then we are not any richer than before when we just had 10k and no debt. Yet in the former case M2 is 20k higher.

The point is that M2 is not money - it's one of many measurements of money supply.

Franz Von Peppercorn wrote: »

Banks do create money when they loan. A loan doesn’t come from deposits or reserves as people think.

That banks can just create loans out of nothing is a common misconception. Look at the balance sheet of any retail bank and you will see liabilities (deposits, issued bonds, equity, etc.) and assets (loans, reserves, cash float, etc.). These have to balance - in order to make loans you need balancing deposits and commercial borrowings.

Retail banking isn't magic or complex - it's actually very simple. They raise funds (taking in deposits, selling bonds, borrowing from other institutions, etc) paying x% interest and then they loan out most of the money while charging more than x% interest. Not all of the funds are lent out - a fraction is kept in reserve to cover risk/contingencies/bad loans/etc. It's worked like this for millenia. A bank with no equity or deposits/funding simply cannot issue a loan - there are no exceptions.

The confusion occurs because of the M2 vs money difference. M2 only counts accounts with a credit balance and ignores those in debt. When a bank issues a loan and it ends up in someones account it increases M2 even though has been no NET change in the amount of money.

klaaaz · 27-04-2019 07:18PM

gjim wrote: »

We unpegged from sterling in the 70s and things got worse - 80's inflation and unemployment. The modern "boom" occurred from the early 90s AFTER we had joined the ERM - i.e. pegged the punt to the ECU.

About the same time, there were ceasefire's leading to peace agreements regarding the north, this helped create the environment for international investment to flow in. That's why the Brexit stuff is so important to us that the likes of GFA is not breached, international investors need confidence to invest in a stable country, the north is only 60 miles from Dublin, the Mourne mountains are viewable from Dublin on a sunny day. Point being, the place is actually closer than one thinks, stability on the border brings prosperity.

Franz Von Peppercorn · 27-04-2019 07:43PM

gjim wrote: »

I probably didn't make that example very clear but the only difference is that the balances (money owed to each other) is recorded by a retail bank somewhere.

If both of us have 20k in our bank accounts but each owe 10k, then we are not any richer than before when we just had 10k and no debt. Yet in the former case M2 is 20k higher.

That’s not true at all. The fact that we owe each other money, or had repaid each other a debt between ourselves doesn’t affect money supply. I’m not sure what you are arguing here tbh. If I owe you 10k and have 20k on deposit while you have 10K on deposit, after it is repaid you have 20k and I have 10k. Same amount of 30k is kept on deposit somewhere. This isn’t the same as with banks.

The point is that M2 is not money - it's one of many measurements of money supply.

It’s a measure of money. The distinction of money
Vs money supply is incoherent. Money in my deposit account is a store of value, a unit of value and a medium of exchange. I pay for stuff with my debit card. So, it’s money. (Btw you are the one narrowing it down to M2, I prefer to say deposits which are clearly money).

That banks can just create loans out of nothing is a common misconception.

It’s not actually commonly thought (or taught). Most people think that banks lend from reserves or from deposits.

Look at the balance sheet of any retail bank and you will see liabilities (deposits, issued bonds, equity, etc.) and assets (loans, reserves, cash float, etc.). These have to balance - in order to make loans you need balancing deposits and commercial borrowings.

There’s a balance after the loan is issued between the liabilities and the assets of the bank alright, but it happens after the loan is issued. For simplicity’s sake let’s say the bank loans John 100k which he keeps on deposit for a while in the same bank. On the day of issuance the loan is an asset to the bank, and the deposit is a liability. That is an accounting balance for the bank, but the money supply on deposit has increased in the economy.

Retail banking isn't magic or complex - it's actually very simple. They raise funds (taking in deposits, selling bonds, borrowing from other institutions, etc) paying x% interest and then they loan out most of the money while charging more than x% interest. Not all of the funds are lent out - a fraction is kept in reserve to cover risk/contingencies/bad loans/etc. It's worked like this for millenia. A bank with no equity or deposits/funding simply cannot issue a loan - there are no exceptions.

while a bank needs reserves modern banking doesn’t use the reserves or the deposits (which are a liability to the bank) to directly fund the loans. Not these days, banking isn’t the same as thousands of years ago.

The confusion occurs because of the M2 vs money difference. M2 only counts accounts with a credit balance and ignores those in debt. When a bank issues a loan and it ends up in someones account it increases M2 even though has been no NET change in the amount of money.

Deposit accounts are money accounts. Money isn’t just coinage. I use a debit card for most purchases.

It’s not 200bc so we need to update our ideas on money.

Don’t trust me. Trust the BOE.

https://www.bankofengland.co.uk/knowledgebank/how-is-money-created

Wanderer78 · 27-04-2019 09:10PM

Franz Von Peppercorn wrote: »

Nope. Still you and me.

ah you maybe underestimating this, you d be surprised the amount of people talking about this, and groups forming to spread the word, you also know a hell of a lot more than i do on the subject matter also

gjim · 27-04-2019 09:54PM

Franz Von Peppercorn wrote: »

That’s not true at all. The fact that we owe each other money, or had repaid each other a debt between ourselves doesn’t affect money supply. I’m not sure what you are arguing here tbh. If I owe you 10k and have 20k on deposit while you have 10K on deposit, after it is repaid you have 20k and I have 10k. Same amount of 30k is kept on deposit somewhere. This isn’t the same as with banks.

Sorry my fault - I worded the example badly "owe 10k" was ambiguous. But compare one bunch of people with 10k on deposit with one where everyone has 20k on deposit but a debt (with the bank) of 10k. Neither group are net richer but people moving from the first group to the second group increases M2.

Franz Von Peppercorn wrote: »

It’s not actually commonly thought (or taught). Most people think that banks lend from reserves or from deposits.

There’s a balance after the loan is issued between the liabilities and the assets of the bank alright, but it happens after the loan is issued. For simplicity’s sake let’s say the bank loans John 100k which he keeps on deposit for a while in the same bank. On the day of issuance the loan is an asset to the bank, and the deposit is a liability. That is an accounting balance for the bank, but the money supply on deposit has increased in the economy.

while a bank needs reserves modern banking doesn’t use the reserves or the deposits (which are a liability to the bank) to directly fund the loans. Not these days, banking isn’t the same as thousands of years ago.

I don't see how your story about John shows that "deposits" aren't used to fund loans. The bank cannot give John the loan unless it has funds and it's funds are used up in the process of giving loans. John has the right to demand the 100k in cash and the bank needs depositor's money to allow him to do so.

Of course there are other sources of funds but look at AIB's balance sheet for example - "customer accounts" represent 63.5% of its funding - i.e. the money available for lending - this comes from deposit/current account balances. Why do distressed banks stop lending if they can write loans without funds?

The confusion might be with language - "deposit" vs "depositor funds". Of course the former is a liability on the bank's balance sheet but when a bank takes in a deposit (or issues a bond, conducts institutional borrowing), it also creates an asset - the depositor's money and/or cash. It's these funds - the cash/money given to the bank - that are used to fund the creation of loans.

Franz Von Peppercorn wrote: »

Deposit accounts are money accounts. Money isn’t just coinage. I use a debit card for most purchases.

It’s not 200bc so we need to update our ideas on money.

Making a living by taking in deposits and giving out loans has been around for millennia. Scale and technology are different but the underlying model hasn't fundmentally changed - the model works just as well with gold and silver as it does with fiat money or even for invented currencies and IOUs. When are you suggesting the fundamentals of retail banking suddenly changed?

The mistake is to not see the distinction between the aggregate effect of retail banking on a measure of money supply (i.e. loans "create" money as your BoE document explains) with the actual operations of retail banking which are like every other business and don't have magical powers to create something from nothing.

Nobelium · 27-04-2019 10:05PM

The EU have rules and regulations and audits about the most mundane of matters such as personal turf cutting (and I'm pro EU not anti EU), why do the EU not have any rules, regulations or audits that would have prevented all the Irish Banking shenanigans and financial mismanagement that went on ?

ogsjw · 27-04-2019 10:07PM

sxt wrote: »

Does anybody know if the outcome would have been different if different politicians had of been negotiating at that time or is that a fallacy

I mean it's not like present day politicians are any more capable... although Bertie is a special case, to be sure.

Wasn't he finance minister when he guffawed in the face of the economist who warned it was coming on some tv show?

Nobelium · 27-04-2019 10:31PM

ogsjw wrote: »

I mean it's not like present day politicians are any more capable... although Bertie is a special case, to be sure.

Wasn't he finance minister when he guffawed in the face of the economist who warned it was coming on some tv show?

Unfortunately in Ireland, Bertie's, Charlie's, etc. etc. are the rule, not the special cases. Circumstances just happened to overtake Charlie and Bertie, so their malpractice became undeniable by the public.

L1011 · 27-04-2019 11:00PM

There wasn't much room for difference in negotiations really. An earlier change of Government might have turned the tide on interest rates quicker - international confidence was lost in FF; they had to go and nothing would improve until they did. But no, the Greens held on for months and months longer than necessary to get a few minor things they wanted done before pulling the plug.

For all the rank incompetence swimming around at the time, Lenihan was fairly competent. The agreed interest rates on all parts of the bailout deal were unacceptable, but probably the best we could get with FF in charge. Everyone bar the UK either cut rates or allowed refinancing once we could borrow cheaper - but the UK is forcing us to repay them at the original price!

bells of shandon · 28-04-2019 03:47PM

Nobelium wrote: »

The EU have rules and regulations and audits about the most mundane of matters such as personal turf cutting (and I'm pro EU not anti EU), why do the EU not have any rules, regulations or audits that would have prevented all the Irish Banking shenanigans and financial mismanagement that went on ?

Because the Irish Banking Regulation was dismantled in 1998 and a deliberately useless unit put in place ,prior to the racket.
Banks then had no brakes on their lending, and the predators waited for the inevitable bubble to burst.
An old banking trick, going back hudreds of years.

Nobelium · 28-04-2019 08:47PM

bells of shandon wrote: »

[/B]
Because the Irish Banking Regulation was dismantled in 1998 and a deliberately useless unit put in place ,prior to the racket.
Banks then had no brakes on their lending, and the predators waited for the inevitable bubble to burst.
An old banking trick, going back hudreds of years.

Yes, but why do the EU with all it's other rules and regulations ignore regulating for this ? And what if anything has been put in place to prevent something similar again when the opportunity presents itself ?

bells of shandon · 30-04-2019 07:37AM

Nobelium wrote: »

Yes, but why do the EU with all it's other rules and regulations ignore regulating for this ? And what if anything has been put in place to prevent something similar again when the opportunity presents itself ?

Because the EU/ECB initiated the racket with the complicity of their underlings in Ireland. Ireland is now a debt slave and is forever under the thumb of the EU.
Our politicians have no power and do as they are told, and sign off on various agreements.
PESCO.UN Migrant Pact, Mass Immigration.
This particular racket cannot be used for another generation. Peoples attention will be diverted to some other racket ,like Climate Change.
Check out the report of Robert Pye, ex-Dept of Finance official, whose report was not included in the Banking Enquiry.(another smoke screen)
Kevin Cardiff was used as the Patsy to take the blame, and was rewarded with a sinecure in Brussels.

Jimmy_oc1998 · 30-04-2019 09:28AM

I wish I was an adult at the time of the crash. I was only 16 or 17 at the time.

I'd love to know what the good times were like. How different was it to nowadays?

Only thing I remember is there seemed to be more offers and bargains advertised on tv and the likes. Things like spar advertising 1 euro firelogs etc. But maybe that's only because my memory started to become concrete then?

Nowadays the main topic seems to be the shortage of housing and how many poor people there are. Was there as much focus on poor people during the boom? Like now we have solidarity/pbp etc. all talking about how things are bad. Did these types only come in during 2011 or was it roughly the same during the boom?

Jimmy_oc1998 · 30-04-2019 09:31AM

paw patrol wrote: »

I wish people took time to read this post twice...that is the facts...we repaid peoples investment in a private company...this is disgusting.

What would the implications be for not paying back the bondholders?

Would it be a case we wouldn't be able to borrow in the future (i.e now) or else we'd have to pay a massive %?

twinytwo · 30-04-2019 09:43AM

Gloomtastic! wrote: »

Why is always about paying more tax? Why don’t we start looking seriously at where we spend the money?

That would take balls on the part of politicians.. none of which have any.

Addressing the huge amounts of waste in this country will never happen due to corruption, cronyism etc.

Trade unions hold the country to ransom so its political suicide to take them on.

twinytwo · 30-04-2019 10:13AM

Jimmy_oc1998 wrote: »

I wish I was an adult at the time of the crash. I was only 16 or 17 at the time.

I'd love to know what the good times were like. How different was it to nowadays?

Only thing I remember is there seemed to be more offers and bargains advertised on tv and the likes. Things like spar advertising 1 euro firelogs etc. But maybe that's only because my memory started to become concrete then?

Nowadays the main topic seems to be the shortage of housing and how many poor people there are. Was there as much focus on poor people during the boom? Like now we have solidarity/pbp etc. all talking about how things are bad. Did these types only come in during 2011 or was it roughly the same during the boom?

The "good times" for the most part was built on credit. Numerous people were wealthy on paper only. Whole thing driven by Bertie allowing investors in on the first time property market.

Banks and developers drove property speculation and we ended up in the mess we did.

Remember Bertie told those who spoke of a recession pre 08 to go stick their head in a gas over.

Essentially there was no good times, they just tricked themselves into thinking there was.

jk23 · 30-04-2019 10:19AM

twinytwo wrote: »

The "good times" for the most part was built on credit. Numerous people were wealthy on paper only. Whole thing driven by Bertie allowing investors in on the first time property market.

Banks and developers drove property speculation and we ended up in the mess we did.

Remember Bertie told those who spoke of a recession pre 08 to go stick their head in a gas over.

Was there more people going on holidays during the boom? . My memory of it was alot of construction workers in 4x4s and numerous houses being built with money being no object :O

Geuze · 30-04-2019 10:20AM

gjim wrote: »

We unpegged from sterling in the 70s and things got worse - 80's inflation and unemployment. The modern "boom" occurred from the early 90s AFTER we had joined the ERM - i.e. pegged the punt to the ECU.

Note that we broke the link with GBP in 1979, and joined the EMS in 1979.

We have never had a independent currency.

30-04-2019 10:30AM

L1011 wrote: »

Everyone bar the UK either cut rates or allowed refinancing once we could borrow cheaper - but the UK is forcing us to repay them at the original price!

The UK cut the rates in 2012, in line with European lenders.

https://www.rte.ie/news/business/2012/0611/324579-uk-cuts-interest-rate-on-irish-loan/

twinytwo · 30-04-2019 10:39AM

jk23 wrote: »

Was there more people going on holidays during the boom? . My memory of it was alot of construction workers in 4x4s and numerous houses being built with money being no object :O

people going on multiple holidays a year. Loads of new cars.. again all on credit (for the most part). All well and good till the pay checks stopped coming in.

Re Ireland Banking crisis 2008

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