Default is inevitable. Discuss.

PeterIanStaker · 01-04-2011 06:49PM

So two huge "superbanks" is the plan.

Rising majestically from the ashes and all that guff.

When are we going to be forced to bail out the superbanks?

loldog · 01-04-2011 07:28PM

PeterIanStaker wrote: »

So two huge "superbanks" is the plan.

Rising majestically from the ashes and all that guff.

When are we going to be forced to bail out the superbanks?

Too big to fail? Make them bigger!

.

PeterIanStaker · 01-04-2011 09:41PM

loldog wrote: »

Too big to fail? Make them bigger!

.

that's what they said about the Titanic . . . .

View · 01-04-2011 09:51PM

PeterIanStaker wrote: »

So two huge "superbanks" is the plan.

Rising majestically from the ashes and all that guff.

When are we going to be forced to bail out the superbanks?

I don't think it is a case of superbanks, much less huge ones, rather it is is more a case of:

Big Bank A + Medium Banks B & C -> Medium Bank X

and:

Big Bank D + Medium Banks E & F -> Medium Bank Y

If it works we end up with:

Value of Medium Bank X > 0

and:

Value of Medium Bank Y > 0

At which point, if we are smart, we sell those two banks to big international banks and put a constitutional ban in place on the entire concept of "Irish banks" so we never have to re-visit this mess ever again.

PeterIanStaker · 03-04-2011 01:03PM

I've a poll over in AH on whether or not we should default.

Slydice · 03-04-2011 09:56PM

Colm McCarthy in the irish independent and over on the irish economy blog discussing issues including and/or related to default.

indo article:
http://www.independent.ie/opinion/analysis/ireland-has-lost-capacity-to-borrow-2607416.html

irish economy blog:
http://www.irisheconomy.ie/index.php/2011/04/03/what-irish-bond-prices-are-saying/

Idbatterim · 04-04-2011 01:01AM

McCarthys independent artilce really hits the nail on the head, seems that NEW ERA, is actually no different from FF ERA!

ei.sdraob · 04-04-2011 07:56AM

Cue people around here proceeding to call Colm a "doom monger" and accuse him of "talking down the economy" :rolleyes: when all he is a realist telling is how it is.

danbohan · 04-04-2011 08:37AM

ei.sdraob wrote: »

Cue people around here proceeding to call Colm a "doom monger" and accuse him of "talking down the economy" :rolleyes: when all he is a realist telling is how it is.

garret prob label him a celebrity now as well , ogh the shame !

ei.sdraob · 04-04-2011 09:11AM

danbohan wrote: »

garret prob label him a celebrity now as well , ogh the shame !

Garret really let himself down with his article, while yes its no secret that DmCW makes a living out of being a dramatist, to call him dangerous to the economy reminds me of FF tactics of before :mad:

Does he really think that someone who is about to invest millions/billions in Irish bonds would not have the money to hire someone to research the market and instead of listen to some irishindependent collumnist and drama queen ?

Ive lost all respect I had for him, I suppose from someone who had the bright spark to tax children's shoes, now wonder.

K-9 · 04-04-2011 10:50AM

ei.sdraob wrote: »

Does he really think that someone who is about to invest millions/billions in Irish bonds would not have the money to hire someone to research the market and instead of listen to some irishindependent collumnist and drama queen ?

Well going on some investors track record, no!

fred252 · 04-04-2011 11:01AM

Slydice wrote: »

Colm McCarthy in the irish independent and over on the irish economy blog discussing issues including and/or related to default.

indo article:
http://www.independent.ie/opinion/analysis/ireland-has-lost-capacity-to-borrow-2607416.html

irish economy blog:
http://www.irisheconomy.ie/index.php/2011/04/03/what-irish-bond-prices-are-saying/

one of his main points is about the wasted decade of the 80s. wasn't the main factor in this decade being "wasted" the stubborn refusal to devalue the punt and once we did devalue the economy started to revive? he doesn't allude to this or the fact that membership of the euro means this economic policy tool is unavailable to us.

Jaysoose · 04-04-2011 11:28AM

The part of the article that struck home with me is that ireland is currently signed up to overspend by 40% yet again. How long can we continue to do the same things and hope somehow we get out of this mess before its to late. Its like the entire politicial class have their fingers in their ears.

"Errors are excusable but repeated errors are unforgivable"

ei.sdraob · 04-04-2011 11:34AM

K-9 wrote: »

Well going on some investors track record, no!

Considering these bondholders got paid on debt that was not even guaranteed

Then they did a good job :rolleyes:

professore · 04-04-2011 11:56AM

Again, why did Cowen and Lenihan unconditionally guarantee all the banks? I thought a limited guarantee of the systemic banks (AIB and BofI) made sense, to stabilise the system and give them time to sort the problem, and separate the wheat from the chaff (lots of chaff!!!). Put a limit on it, say 3 - 4 billion. An open-ended guarantee is madness. Get an insurance company to do it!

Whatever about anything else any idiot could see at the time guaranteeing Anglo (almost typed Angola there, more appropriate actually!!!!) was insane. The only reason I can possibly see for it was political old boys network.

So I think default is inevitable now, not just for Ireland, but for Greece and Portugal. Portugal are playing ostrich too at the moment. Once Portugal goes (I give it 6 weeks max) then Spain is next. Do you believe the Spanish banks? I believe them in the same way I believe a Spanish player's claim for a penalty after an extravagant dive in a World Cup game. I was in rural Spain in a mountain town 2 years ago visiting a good Spanish friend and the parallels with Ireland were extraordinary. Huge apartment blocks that could hold 3 times the town's population, and this is nowhere near any tourist centre.

I can see noises coming from Germany that they are getting fed up with the whole thing, and they have a point. They have endured years of austerity to get their economy back on track after reunification, and now they have to bail out the whole Eurozone? They see the Euro's outer defences falling one by one, and it's only a matter of time before a tsunami of debt floods over them. Merkel is trying to crawl to the next election and leave the mess for someone else to clean up. I personally don't think she will make it, as this will all blow up over the next 12 months. In all this I am surprised at the power she yields, I never thought of the EU as a German commonwealth before, but that's effectively what it has become - or maybe it always was and I was too blind to see it.

I do not believe that the German taxpayer will end up paying the bill for this mess. I am not impressed that no politician in Europe is willing to grasp the nettle and admit we need radically new solutions to get ourselves out of this hole. They are acting like an alcoholic who can't admit he has a problem.

None of this changes the fact that default or no default, Ireland is in for a really rough time over the next several years. I think a default of one sort or another is inevitable TBH. Sorry for the rant, but that's how I see it.

ardmacha · 04-04-2011 12:14PM

I've a poll over in AH on whether or not we should default.

I hope the IMF and the bond markets are not reading AH, otherwise it is all over!

ei.sdraob · 04-04-2011 12:16PM

ardmacha wrote: »

I hope the IMF and the bond markets are not reading AH, otherwise it is all over!

Garret is that thou

professore · 04-04-2011 12:26PM

Slydice wrote: »

Colm McCarthy in the irish independent and over on the irish economy blog discussing issues including and/or related to default.

indo article:
http://www.independent.ie/opinion/analysis/ireland-has-lost-capacity-to-borrow-2607416.html

irish economy blog:
http://www.irisheconomy.ie/index.php/2011/04/03/what-irish-bond-prices-are-saying/

Slydice, hadn't seen these two before. They nail it in clear concise terms. Thanks.

professore · 04-04-2011 12:33PM

professore wrote: »

So I think default is inevitable now, not just for Ireland, but for Greece and Portugal. Portugal are playing ostrich too at the moment. Once Portugal goes (I give it 6 weeks max) then Spain is next. Do you believe the Spanish banks? I believe them in the same way I believe a Spanish player's claim for a penalty after an extravagant dive in a World Cup game. I was in rural Spain in a mountain town 2 years ago visiting a good Spanish friend and the parallels with Ireland were extraordinary. Huge apartment blocks that could hold 3 times the town's population, and this is nowhere near any tourist centre.

I'm beginning to think David McWilliams is stalking me!

http://www.davidmcwilliams.ie/2011/04/04/economist-mcwilliams-says-ireland-is-microcosm-of-spain

later12 · 04-04-2011 03:13PM

Read a depressing editorial in the FT this morning highlighting some points that some may nevertheless find interesting

http://www.ft.com/cms/s/0/b6a24d88-5e22-11e0-b1d8-00144feab49a.html#axzz1IZ0f4bLg

The €24bn committed last week corresponds roughly in size to the pension reserves Ireland had built up by the end of the boom; and also roughly to the amount of unsecured bonds – without a formal sovereign guarantee – issued by what were then private Irish banks. It was the previous government’s choice to use the former to backstop the latter. Under duress from its eurozone partners, the new government has made the same choice.

ei.sdraob · 04-04-2011 04:04PM

if anyone is unable to open the page, then click on it from google news result page > http://www.google.co.uk/search?q=One+more+bail-out+of+Ireland's+banks

whiteonion · 04-04-2011 07:39PM

Ireland will default at some stage. This debt can never be paid back and therefore a default is inevitable. It might not be called a default, they will probably call it a "restructure of debts".

What will happen is at one point in the future interest rates will rise and when they do there will come a time when a large portion of the taxes collected goes directly into paying interest on the debt.

There will come a time when Ireland can't both afford to pay the debt and keep services running that you expect to be running in a welfare state. Anyone with some sort of pension plan better cash in now and move the money abroad. They will plunder all the pensions like they've done in other countries. This raid of the pension funds is only the beginning.

whiteonion · 06-04-2011 02:13PM

Spending is still outpacing tax intake. http://www.irishtimes.com/newspaper/breaking/2011/0405/breaking7.html The draconian levels of austerity required to balance the budget would throw the country into unrest. No politician who wants to be reelected would ever dare try balancing the budget for real. Default is inevitable. What can't be repaid won't be repaid so at one point in time there will be some sort of default. Now the government might choose to default on their obligations towards pensioners instead of their foreign creditors but there will be a default in one way or the other.

dan_d · 06-04-2011 02:21PM

The one thing I got from the tax intake figures this week was the Gov is outspending it's intake - predicted or otherwise.

I believe I read somewhere that the 2 biggest depts - Health, and Social Protection (or what they call it) - actually had increases in their spending. While spending has practically stopped on things life infrastructure and capital spending.

I'm sorry - wtf?? The Dept of Social whatever it is is understandable with the Live Register. Not right, but understandable. Health?? I won't even go there.

Yet there was not one single mention of cutting the spend. Not one. The whole focus is on raising the tax incomes somehow. NOTHING - not a peep - on cutting the spending (I cannot emphasise this enough). This annoyed the hell out of me. Surely you should fit your spending to your income, not the other way around. The pool of people paying tax is getting smaller and smaller and cannot be squeezed much further, if at all.

This does not bode well for us at all. Why do have such retards in charge of things? Isn't there anyone in there with a brain and enough of a backbone to put the foot down and call halt to the whole mess??

later12 · 06-04-2011 02:27PM

dan_d wrote: »

I'm sorry - wtf?? The Dept of Social whatever it is is understandable with the Live Register. Not right, but understandable. Health?? I won't even go there.

I'm not sure if Community Welfare and Rent Assistance still comes under Health, or more importantly whether it did during the period in question, but certainly medical card expenditure will have increased substantially.

dynamick · 06-04-2011 02:44PM

Perhaps the health current spend is rising because of the once-off costs of the redundancy scheme.

Saying that we have to default because balancing the budget would be too painful ignores the fact that following a default, the budget has to be balanced because there is no borrowing possible to make up the difference.

The IMF target is not to balance the budget this year it is to balance it within 3% in 4 years time.

erictheviking1 · 06-04-2011 02:49PM

professore wrote: »

Again, why did Cowen and Lenihan unconditionally guarantee all the banks? I thought a limited guarantee of the systemic banks (AIB and BofI) made sense, to stabilise the system and give them time to sort the problem, and separate the wheat from the chaff (lots of chaff!!!). Put a limit on it, say 3 - 4 billion. An open-ended guarantee is madness. Get an insurance company to do it!

Whatever about anything else any idiot could see at the time guaranteeing Anglo (almost typed Angola there, more appropriate actually!!!!) was insane. The only reason I can possibly see for it was political old boys network.

So I think default is inevitable now, not just for Ireland, but for Greece and Portugal. Portugal are playing ostrich too at the moment. Once Portugal goes (I give it 6 weeks max) then Spain is next. Do you believe the Spanish banks? I believe them in the same way I believe a Spanish player's claim for a penalty after an extravagant dive in a World Cup game. I was in rural Spain in a mountain town 2 years ago visiting a good Spanish friend and the parallels with Ireland were extraordinary. Huge apartment blocks that could hold 3 times the town's population, and this is nowhere near any tourist centre.

I can see noises coming from Germany that they are getting fed up with the whole thing, and they have a point. They have endured years of austerity to get their economy back on track after reunification, and now they have to bail out the whole Eurozone? They see the Euro's outer defences falling one by one, and it's only a matter of time before a tsunami of debt floods over them. Merkel is trying to crawl to the next election and leave the mess for someone else to clean up. I personally don't think she will make it, as this will all blow up over the next 12 months. In all this I am surprised at the power she yields, I never thought of the EU as a German commonwealth before, but that's effectively what it has become - or maybe it always was and I was too blind to see it.

I do not believe that the German taxpayer will end up paying the bill for this mess. I am not impressed that no politician in Europe is willing to grasp the nettle and admit we need radically new solutions to get ourselves out of this hole. They are acting like an alcoholic who can't admit he has a problem.

None of this changes the fact that default or no default, Ireland is in for a really rough time over the next several years. I think a default of one sort or another is inevitable TBH. Sorry for the rant, but that's how I see it.

I don't really care about how the German's feel. The Eurozone was their idea. They will suit themselves when it comes to setting interest rates etc. In the long term its all about suiting themselves, and France of course.
Default? Bring it on! It will affect the rich more than it affects me.;)
I don't see why I should pay a property developer or a bankers debt. feck them

K-9 · 06-04-2011 03:34PM

dynamick wrote: »

Perhaps the health current spend is rising because of the once-off costs of the redundancy scheme.

Saying that we have to default because balancing the budget would be too painful ignores the fact that following a default, the budget has to be balanced because there is no borrowing possible to make up the difference.

The IMF target is not to balance the budget this year it is to balance it within 3% in 4 years time.

AFAIK, redundancy is treated as a capital item.

Marcusm · 06-04-2011 11:37PM

Portugal has, I believe, now a dean application for support; effectively inevitable or 3 months or more. Bond Market sympathy (or assumed empathy based on bond yields, nt sure of the actual depth f trading) seems to have upgraded Spain.

Germany financed ireland's boom- on this alone was McWillams ahead of the game in 2003. The German banks have been bailed out by the ECB refinancing the Irish banks to repay the German funding. The only question now is whether those losses will be socialised in Ireland alone or through an Irish default or restructuring throughout the Eurozone, ie principally Germany.

femur61 · 07-04-2011 07:16AM

Why have the terms of the bailout set so high if it widely accepted we will default? Seems FT and all leading economists seem to think default is inevitable so why are the terms not with parameters that can be met?

Default is inevitable. Discuss.

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