National Bankruptcy Looks Increasingly Imminent

[Actin The Sham]

Interesting OP-Ed from the IT last week:

Nama is in effect Fianna Fáil’s shrine to the property bubble for which the party still yearns. Prepare to pay 10 per cent more in income tax for the next 10 years to pay for it all . . . we are headed for national bankruptcy, argues MORGAN KELLY

WRITING HERE two years ago, I pointed out that the exuberant lending of Irish banks to builders and property developers would sink them if the property bubble burst. Since then, the bubble has burst, the banks have sunk, and we are all left wondering how to salvage them.

Two ideas for fixing the banks have been suggested: a bad bank or National Asset Management Agency (Nama) and nationalisation. While these proposals differ in detail, their impact will be identical. Irish taxpayers will be stuck with a large bill, and in return will get an undercapitalised and politically controlled banking system.

A far more efficient and cheaper alternative to Nama is to copy what Barack Obama did with General Motors, and transfer ownership of Irish banks to their bond holders. In this way we can achieve well capitalised banks, run without political interference, at minimal cost to taxpayers.

By converting a portion of Allies Irish Banks’ approximately €40 billion of bonds, and Bank of Ireland’s €50 billion, into shares, each institution can be recapitalised. Transferring ownership to bond holders will not cost the taxpayer a cent and will avoid interminable legal battles over the transfer of assets to Nama.

While the shaky state of Irish banks had been worrying investors since early 2007, when the crisis finally broke in late September the Government was taken completely by surprise and reacted with blind panic. Faced with a run on Anglo Irish Bank by institutional depositors on September 29th, the Government was stampeded into guaranteeing virtually all liabilities, except shares, of the six Irish banks.

This guarantee contained two obvious but fundamental flaws. Everything that has happened since – the proposed recapitalisation of Anglo, the nationalisation of Anglo, the establishment of Nama – can be understood as the Government scrambling to catch up with the consequences of these two errors.

The first mistake was to guarantee not only deposits – which had to be guaranteed – but also most of the existing bonds issued by banks to other financial institutions. Bond holders receive higher returns in the knowledge that they are accepting the risk of losses on their investment. In addition, unlike depositors who can scarper, existing bond holders are effectively stuck.

It made no sense for the Government to insist that taxpayers would take the hit on any bank losses instead of the financial institutions that had already entered legal contracts to do so.

The second mistake was to extend the guarantee to Anglo Irish and Irish Nationwide. As specialised property development lenders with incompetent management, they were at risk of heavy losses as their market collapsed, and fulfilled no role in the wider economy.

In making the guarantee on September 29th, I do not doubt that the Government believed that the difficulties of Irish banks ran no deeper than temporary liquidity problems stemming from the international crisis. However, as it has become apparent that Anglo was a mismanaged wreck, with AIB and Bank of Ireland scarcely better, the Government has stuck with the mantra that all banks are equally important and equally worth saving at any cost to the taxpayer.

Brian Lenihan and Brian Cowen are happier to dice with national bankruptcy than lose face by admitting that they were misled about the state of Irish banks last September.

Nama, then, is the latest twist in the Government’s increasingly bizarre efforts to save the Irish banking system while claiming that it does not really need to be saved.

Underlying Nama is the delusion that the collapse of our property bubble is a temporary downturn. In a few years time when the global economy recovers we will be back building houses like it was 2006. All the ghost estates, empty office blocks, guest-less hotels and weed choked fields that Nama has bought on our behalf will once again be worth a fortune.

The reality is that, because of our surfeit of empty housing, there will be almost no construction activity for the next decade. Empty apartment blocks in Dublin will eventually be rented, albeit at rates so low that many will decay into slums. However, most of the unfinished estates that litter rural Ireland – where the only economic activity was building houses – will never be occupied.

Nama is a variant on the “Cash for Trash” scheme briefly floated in the United States last year where the government would recapitalise banks by overpaying for their bad loans. Our Government is proposing to buy €90 billion of loans and will reportedly pay €75 billion for them.

The International Monetary Fund (IMF) guesses that Nama will cost us €35 billion, and this is probably optimistic. The narrowness of the Irish property market meant that banks effectively operated a pyramid scheme, bidding up prices against each other. Now that banks cannot lend, development assets are effectively worthless.

The taxpayer is likely to lose well over €25 billion on Anglo alone. Among its “assets” are €4 billion lent for Irish hotels, and almost €20 billion for empty fields and building sites. In fact, I suspect that the €20 billion already repaid to the casino that was Anglo represents winners cashing in their chips, while the outstanding €70 billion of loans will turn out to be worthless. And it is well to remember, as the architects of Nama have not, that although the problems of Irish banks begin with developers, they do not end there.

The same recklessness that impelled banks to lend hundreds of millions to builders to whom most of us would hesitate to lend a bucket; also led them to fling tens of billions in mortgages, car loans, and credit cards at people with little ability to repay. Even without the bad debts of developers, the losses on these household loans over the next few years will probably be sufficient to drain most of the capital out of AIB and Bank of Ireland.

Brian Lenihan’s largesse to bond holders could cost you and me €50 to €70 billion. What do numbers like these mean?

The easiest way to put numbers of this magnitude into perspective is to remember that in 2008 the Government generated €13 billion in income tax. Every time you hear €10 billion, then, think of paying 10 per cent more income tax annually for the next decade.

In other words, the fiscal capacity of a state with only two million taxpayers, and falling fast, is frighteningly thin. Ten billion here, and ten billion there and, before you know it, you are talking national bankrutcy. Even without bankrupty, Nama will ensure a crushing tax burden for everyone in Ireland for decades.

The tragedy is that, were it not for the Government’s botched efforts to save financiers from the predictable consequences of their own greed, the Irish economy would have recovered far more quickly than most people, including the IMF, expect.

Recovery for the Irish economy will not be easy – there is no painless way for an economy to move from getting about 20 per cent of its national income from construction to getting about zero – but the flexibility of the Irish labour market would have ensured that our incomes and share of global trade would have rapidly recovered. Now, however, any fruits of recovery will be squandered on Nama.

Aside from the fact that Nama will spend huge sums to achieve little, its governance is problematic. Here, the fog of secrecy that has quietly settled over Anglo Irish since nationalisation sets an unsettling precedent.

After revelations of financial irregularities forced the resignation of three executive directors, Anglo moved decisively to replace them with . . . Anglo insiders. Most astonishing, in the light of the scandal over Irish Nationwide deposits, was the decision to replace Anglo’s disgraced financial director with his immediate subordinate, Anglo’s chief financial officer.

It is hard not to conclude that a deliberate decision has been made at the highest level of Government that what happened in Anglo, stays in Anglo. And we can expect Nama to be run in the same tight manner.

While there has been considerable speculation about dark motives for bailing out developers and banks, I do not believe that the Government’s behaviour has been corrupt: it has been far worse. At least corruption implies a sense that you are doing wrong, and need to be paid in return. Our Government actually thought it was doing the right thing in risking everything to safeguard the interests of developers who had given us an economy that was the envy of Europe.

Instead of recognising bankers and developers as parasites on our national prosperity, the Government came to see them as its source. While everyone else in Ireland has come to see the past decade as an embarrassing episode of collective insanity to be put behind us as soon as possible, the Government still sees it as the high point of our nation’s history. Nama is effectively Fianna Fáil’s shrine to the bubble, and likely to be an expensive and enduring one.

What should be done instead of Nama? First, we need to understand how the idea of Nama follows from a mistaken analogy with the Swedish banking crisis and bad bank of the early 1990s. The Swedish banks differed in one fundamental way from ours: they only had deposits as liabilities. If their government had not taken over their bad debts, ordinary depositors would have suffered. By contrast, Irish banks had borrowed heavily from other financial institutions through bonds, and these bondholders originally agreed to take losses if Irish banks got into difficulties.

[Actin The Sham]

By placing the costs of the banking collapse primarily on existing holders of bank bonds, the State can improve its credit rating and pull back from the edge of bankruptcy. Knowing that taxpayers are not liable for the losses of AIB and Bank of Ireland will make capital markets more willing to lend to the Irish State.

Instead, like a corpulent Tooth Fairy gently slipping billions under the pillows of sleeping bond holders, Brian Lenihan has chosen to extend the liability guarantee and further weaken the bargaining position of the State.

The drift into national bankruptcy looks increasingly unstoppable.

[o_2_b_a_rebel]

1. Close the banks
2. Use the money previously earmarked for the scheme to purchase 1 piggy bank for every man, woman and child in the country
3. Road to recovery beckons

[Lostmeringtopaddypower]

Saving Anglo was the biggest load of bollocks in the history of the state.

"Systemic importance" my ring.

Of systemic importance to the developers and builders and their crony politburo buddies, maybe.

[o_2_b_a_rebel]

Saving Anglo was the biggest load of bollocks in the history of the state.

"Systemic importance" my ring.

Of systemic importance to the developers and builders and their crony politburo buddies, maybe.

What would you know? You were never in the FF tent at the Galway races so may not be fully briefed.

[Lamps]

Anyone got any solutions though?

Real ones

[o_2_b_a_rebel]

Anyone got any solutions though?

Real ones

ffs. mockery

1. Close the banks
2. Use the money previously earmarked for the scheme to purchase 1 piggy bank for every man, woman and child in the country
3. Road to recovery beckons


there is also the idea that we could as a nation 'sing' our way out of it.

Or we could provide an oil lamp and dry matches to the whole country and get people to look for hidden pirate treasure 'Goonies' style. Its gotta be worth a punt.

[Lamps]

ffs. mockery




there is also the idea that we could as a nation 'sing' our way out of it.

Or we could provide an oil lamp and dry matches to the whole country and get people to look for hidden pirate treasure 'Goonies' style. Its gotta be worth a punt.

Not as crazy as it seems

[jd26]

The ECB is bailing us out big time at the moment.

They're directly buying government bonds, which means there's minimal danger of imminent bankruptcy.

Supposedly, we've been given til 2012 to sort ourselves out.

The most important thing is to find ways of getting people off the dole. Do that and you turn someone from a net recipient into a net contributor. Extending the current PRSI breaks that apply to employing long-term unemployed to any unemployed person would be a good start.

The next things is to get a rise in tax take. The problem is obviously that raising consumption taxes will send people over the border, while raising income tax will suppress consumption. Capital Acquisitions Tax and Capital Gains Tax could probably be increased without too much negative economic effect. Also, cracking down on tax evasion, particularly cigarette smuggling and improperly imported cars has some potential. I think there will be a slight turnaround in consumption taxes soon. Discretionary purchases have stopped, but there's a limit to how long people can put off some purchases.

And then there's spending. Each and every department and semi-state should be required to draw up a plan about how they will reduce their costs without reducing their services. There are a lot of inefficiencies (particularly in the semi-states) and eliminating them should produce lower costs or bigger dividends.

Finally, as international markets gradually improve, we need to consider which semi-states could be privatised or part-privatised.

[Actin The Sham]

Anyone got any solutions though?

Real ones


http://dynimg.rte.ie/00012edc11cr.jpg

[i_didnt_do_nawtin]

Didn't the EU get a look at Anglo's books?

I love this bit:
"Underlying Nama is the delusion that the collapse of our property bubble is a temporary downturn. In a few years time when the global economy recovers we will be back building houses like it was 2006. All the ghost estates, empty office blocks, guest-less hotels and weed choked fields that Nama has bought on our behalf will once again be worth a fortune."

The same shit is happening in the UK, they're talking about increasing house prices and more mortgage enquires. I don't believe a word of it to be honest. I know that the Irish construction sector was far more daft than the UK's.

And there's talk of an extra 5% income tax increase for everyone here too.

[Actin The Sham]

The ECB is bailing us out big time at the moment.

They're directly buying government bonds, which means there's minimal danger of imminent bankruptcy.

Supposedly, we've been given til 2012 to sort ourselves out.

The most important thing is to find ways of getting people off the dole. Do that and you turn someone from a net recipient into a net contributor. Extending the current PRSI breaks that apply to employing long-term unemployed to any unemployed person would be a good start.

The next things is to get a rise in tax take. The problem is obviously that raising consumption taxes will send people over the border, while raising income tax will suppress consumption. Capital Acquisitions Tax and Capital Gains Tax could probably be increased without too much negative economic effect. Also, cracking down on tax evasion, particularly cigarette smuggling and improperly imported cars has some potential. I think there will be a slight turnaround in consumption taxes soon. Discretionary purchases have stopped, but there's a limit to how long people can put off some purchases.

And then there's spending. Each and every department and semi-state should be required to draw up a plan about how they will reduce their costs without reducing their services. There are a lot of inefficiencies (particularly in the semi-states) and eliminating them should produce lower costs or bigger dividends.

Finally, as international markets gradually improve, we need to consider which semi-states could be privatised or part-privatised.

Abolish stamp duty and vat on property sales for twelve months. But only on already built houses.

This "tax holiday" might help the property market to bottom out. Reduce VAT rates to 10% and abolish VRT on cars.

Allow social welfare recipients to work without losing their dole payments for six months. Allocate unemployed marketing people to small enterprise Ireland approved companies for free for twelve months, while still paying them their dole payments. Abolish the €10 departure tax at airports, and initiate a voucher scheme for arriving tourists redeemable at local tourist attractions. Sell Aer Lingus to Ryanair.

[quincytwo]

The ECB is bailing us out big time at the moment.

They're directly buying government bonds, which means there's minimal danger of imminent bankruptcy.

Supposedly, we've been given til 2012 to sort ourselves out.

The most important thing is to find ways of getting people off the dole. Do that and you turn someone from a net recipient into a net contributor. Extending the current PRSI breaks that apply to employing long-term unemployed to any unemployed person would be a good start.

The next things is to get a rise in tax take. The problem is obviously that raising consumption taxes will send people over the border, while raising income tax will suppress consumption. Capital Acquisitions Tax and Capital Gains Tax could probably be increased without too much negative economic effect. Also, cracking down on tax evasion, particularly cigarette smuggling and improperly imported cars has some potential. I think there will be a slight turnaround in consumption taxes soon. Discretionary purchases have stopped, but there's a limit to how long people can put off some purchases.
.
Finally, as international markets gradually improve, we need to consider which semi-states could be privatised or part-privatised.

The people who pay for higher rates of Capital Gains Tax in the cases of land sales are the people who buy the houses !
the sellers always decide how much net profit they want and up the price of the land accordingly : profit plus tax = salling price.

The same goes for costs of providing socail and Affordable houses : the developer does not pay this, the ordinary house buyer pays it !

[i_didnt_do_nawtin]

Abolish stamp duty and vat on property sales for twelve months. But only on already built houses.

This "tax holiday" might help the property market to bottom out. Reduce VAT rates to 10% and abolish VRT on cars.

Allow social welfare recipients to work without losing their dole payments for six months. Allocate unemployed marketing people to small enterprise Ireland approved companies for free for twelve months, while still paying them their dole payments. Abolish the €10 departure tax at airports, and initiate a voucher scheme for arriving tourists redeemable at local tourist attractions. Sell Aer Lingus to Ryanair.

Tourists! Those were probably the first people to get ripped off by our booming economy. I'd like to know how many thousands said they'd never be inclined to return to Ireland again due to the expense. Goodwill squandered, but hey, we all made a quick buck didn't we?

[Lostmeringtopaddypower]

Tourists! Those were probably the first people to get ripped off by our booming economy. I'd like to know how many thousands said they'd never be inclined to return to Ireland again due to the expense. Goodwill squandered, but hey, we all made a quick buck didn't we?

We still fucking are!

I still have to pay 2-3 times what I would pay in Germany for a decent bottle of wine.

Eating out in Ireland is plain robbery.

[jd26]

The people who pay for higher rates of Capital Gains Tax in the cases of land sales are the people who buy the houses !
the sellers always decide how much net profit they want and up the price of the land accordingly : profit plus tax = salling price.

That's the way it used to work.

It's a buyers market now. If a seller overprices then the property won't sell at all. Take a look at any property website and see how many houses have been on sale for over a year. Of course, asking prices have only dropped by 4% in Cork.

The capital gains tax suggestion was more intended for share trades anyway. I doubt there's much CGT being paid on property at all at the moment given the small number of sales. However, stock markets have seen a 20% return this year and while a lot of people are sitting on accumulated losses, there are some profits starting to be turned.

[Lostmeringtopaddypower]

That's the way it used to work.

It's a buyers market now. If a seller overprices then the property won't sell at all. Take a look at any property website and see how many houses have been on sale for over a year. Of course, asking prices have only dropped by 4% in Cork.



This is what I still don't get.

I thought we be at 10-15% lower this year - in line with the economic scene - but no.
Reality has still not kicked in.

Reality is probably between €160-€180K for a 3 bed semi in Ireland.

How can property prices be sustained when there are 200,000 empty houses in Ireland (countless more apartments) and we are heading for 500K on the live register this year

Maybe it'll come down more in H02 as the level of defaults sky-rockets.

I think most people still think there is light at the end of the property tunnel.

There is.

In 7-10 years from now.

[Cliff Barnes]

Abolish stamp duty and vat on property sales for twelve months. But only on already built houses.

This "tax holiday" might help the property market to bottom out. Reduce VAT rates to 10% and abolish VRT on cars.

Allow social welfare recipients to work without losing their dole payments for six months. Allocate unemployed marketing people to small enterprise Ireland approved companies for free for twelve months, while still paying them their dole payments. Abolish the €10 departure tax at airports, and initiate a voucher scheme for arriving tourists redeemable at local tourist attractions. Sell Aer Lingus to Ryanair.

Also put Michael O'Leary in charge for 12 months with executive unlimited powers over all Government Departments.

He would upset a lot of cozy cartels,unions and lazy public servants but might just save the country.

[Lostmeringtopaddypower]

By the way,

how have rental prices developed this year?
As in house rental.

Anyone?

[Cliff Barnes]

This is what I still don't get.

I thought we be at 10-15% lower this year - in line with the economic scene - but no.
Reality has still not kicked in.

Reality is probably between €160-€180K for a 3 bed semi in Ireland.

How can property prices be sustained when there are 200,000 empty houses in Ireland (countless more apartments) and we are heading for 500K on the live register this year

Maybe it'll come down more in H02 as the level of defaults sky-rockets.

I think most people still think there is light at the end of the property tunnel.

There is.

In 7-10 years from now.


Developers have stopped building and still owned plenty of zoned land so are going to turn off the supply until demand ramps up as it inevitably will.

Prof Alan Ahearne said yesterday that this year we will build 10,000 houses,next year 15,000 houses and 40,000 in 2011.

[Hang_Sandwich]

i'd just like to point out that ATS voted FF becuase "there was no other option" in the last election....


just pointing that out for everyone.

[jd26]

This is what I still don't get.

I thought we be at 10-15% lower this year - in line with the economic scene - but no.
Reality has still not kicked in.

The entire house price scene in Ireland is a fraud.

You only ever see references to asking prices.

But here's where the difference is...

In 2005, you had to pay 10-20% above asking price to get a house. Now, you can have it for 10-20% below asking price. I know of someone who (at least this is what he claims) put in a bid of 165K on a house with an asking price of 210K and it was accepted.

The real drop in house prices is around 30%, but it's being disguised by the asking price scam.

[Lostmeringtopaddypower]

Developers have stopped building and still owned plenty of zoned land so are going to turn off the supply until demand ramps up as it inevitably will.

Prof Alan Ahearne said yesterday that this year we will build 10,000 houses,next year 15,000 houses and 40,000 in 2011.

But where is the demand?

A market economy is about supply and demand.

There are hundreds of thousands of empty houses and apartments all over the country.

No 3 bed semi in the country is worth €300K+. The demand is simply not there. (Not even mentioning the substance of these new plasterboard homes.)
A simple p/e factor of between 12-14 times yearly rental income is a commonly used method of calculating worth in America.

i.e.

12-14 times yearly rental income = property value.

Lets take 14 times.

Monthly rental, say, I dunno, a thousand euros (?)

=> 12K per year.

Times 14

Gives: 168K

Yet the average valuation for this property in Ireland is over 300K.

Why?

[Hang_Sandwich]

But where is the demand?

A market economy is about supply and demand.

There are hundreds of thousands of empty houses and apartments all over the country.

No 3 bed semi in the country is worth €300K+. The demand is simply not there. (Not even mentioning the substance of these new plasterboard homes.)
A simple p/e factor of between 12-14 times yearly rental income is a commonly used method of calculating worth in America.

i.e.

12-14 times yearly rental income = property value.

Lets take 14 times.

Monthly rental, say, I dunno, a thousand euros (?)

=> 12K per year.

Times 14

Gives: 168K

Yet the average valuation for this property in Ireland is over 300K.

Why?

thats not what houses are going for though that asking price, estate agents are afraid to lower the asking prices if they did you know they might stimulate market - assuming they reduced prices to be reflective of sale prices

[POL]

Also put Michael O'Leary in charge for 12 months with executive unlimited powers over all Government Departments.

He would upset a lot of cozy cartels,unions and lazy public servants but might just save the country.I love when idiots come out with this horseshit

[Cliff Barnes]

I love when idiots come out with this horseshit

Listen its a winning stratgey that has served you well for almost 20,000 posts.

[leesider]

Now why is it that you and me are being asked to bail out the banks when the vast majority never actually invested in them?? why are these bondholders not being made to suffer first?? Who are these people that they are being put before the Irish citizens??

I think Lenihan mentioned it is to do with reputation well our reputation will be in tatters when we go bankrupt anyway so I guess it is down to who you want to protect Mr. Lenihan.....the bondholders or the tax payers!

[Actin The Sham]

i'd just like to point out that ATS voted FF becuase "there was no other option" in the last election....


just pointing that out for everyone.

That is factually 100% incorrect, and you should know it.


Just pointing that out for everyone.

Think before you post.

[Actin The Sham]

By the way,

how have rental prices developed this year?
As in house rental.

Anyone?

Down 10% and the government is cutting rent allowance supplements as well apparently.

[leesider]

thats not what houses are going for though that asking price, estate agents are afraid to lower the asking prices if they did you know they might stimulate market - assuming they reduced prices to be reflective of sale prices


I agree with jd26 about the asking prices but it is not up to the estate agent to lower the asking price, he can only make his suggestions, it is essentially up to the vendor. Of course the estate agent's advice would be to put it up for eg. 200,000 but accept 170,000. If you actually put the asking price at 170,000 people would only offer 140,000 and so on. The distressed buyer who puts his property up for 150,000, do you think he is actually going to get offered that, not a hope!

[leesider]

Back to my original question who the fuck are these bondholders?????

[i_didnt_do_nawtin]

Back to my original question who the fuck are these bondholders?????

the European Central Bank right now

[leesider]

the European Central Bank right now

No not of government bonds but of bank bonds?? who are the bondholders in AIB and BoI that haven't been made suffer any pain?

[markinmanc]

No not of government bonds but of bank bonds?? who are the bondholders in AIB and BoI that haven't been made suffer any pain?


Other banks?

[jd26]

Probably mostly pension funds.

Also sovereign wealth funds from the Gulf, Far East and Norway.

[leesider]

so what would you think are the reasons for these people before the irish tax payer?

[Hang_Sandwich]

That is factually 100% incorrect, and you should know it.


Just pointing that out for everyone.

Think before you post.

at the last general election you were on here posting same sort of stuff and then came on after voting stating that you went the FF way - true or false?

[Actin The Sham]

at the last general election you were on here posting same sort of stuff and then came on after voting stating that you went the FF way - true or false?

Read your post again.

I did not vote FF in the last election.

[jd26]

so what would you think are the reasons for these people before the irish tax payer?

There seems to have been a substantial miscalculation, particularly in the case of secured bonds.

However, there would probably have been two arguments
A complete collapse one of the big banks would have been calamitous for the Irish economy. Wages wouldn't have been paid; businesses wouldn't be able to pay their bills. A lot of good businesses would have gone to the wall because they had no access to their bank facilities.
If reneging on bonds had led to the collapse of a pension fund, it could have led to huge numbers of people opting out of private pension schemes. This could have had massive long-term consequences for the state.


The real question is what the government could have done instead. The obvious alternatives would have been nationalisation or buying massive equity stakes in the banks.

Both of those would probably have protected the bondholders as well, just not as explicitly. However, it would have screwed over the shareholders. And that's the real question. Why did the government act to bail out the bank shareholders?

That and how they ever allowed the mess to get where it is.

[Actin The Sham]

Meanwhile, in Montrose:

Ireland’s national broadcaster RTÉ is looking for business shows to help its children cope with the country’s economic crisis.


Shelia De Courcy, commissioning editor young people’s programmes, has said she wants to encourage entrepreneurship and lateral thinking for a generation that has never known real poverty.

“There’s the joke that the only difference between Iceland and Ireland is one letter and six months. Ireland is facing a very difficult economic situation. This generation of children has grown up as the Celtic Tiger generation,” she said.

“Deprivation for them is the shop being closed – so how do we prepare these kids who have never known having nothing for the fact there is going to be 15% unemployment by the end of the year? That’s serious.”

The Irish economy grew by an average of 6.5% a year between 1990 and 2007 but shrank by 2.5% in 2008 and is predicted to fall by a further 6.5% this year – triggering a faster rise in unemployment that even the US.

RTÉ is facing its own economic troubles and has a tight budget, but is offering £20,000 per half hour and orders around 400 minutes of original programming every week.

De Courcy is also interested in repeatable shorts with strong narratives and which can air as both a standalone series and as part of a magazine show. “They must have repeatable potential. We repeat the hell out of our programmes. We show them again and again and again so they have to be very, very strong,” she told the Showcomotion children’s conference in Sheffield last week.


****

The above is from a broadcast industry news site I subscribe to. RTÉ are admitting at an industry conference that they "repeat the hell" out of their programmes.


http://www.broadcastnow.co. uk/news/broadcasters/rt-looking-for-kids-business-shows/5003208.article

[Lamps]

I hope they repeat Family that was a great show about the real Dublin. Great show

[o_2_b_a_rebel]

I hope they repeat Family that was a great show about the real Dublin. Great show

'petterol, matches... vooofhhh!'

[slick fingers]

Down 10% and the government is cutting rent allowance supplements as well apparently.

Its down 40% in all areas outside of the city, in some cases more.
A brand new 4 bedroom house with all mod cons in Fermoy for €400, first month free.
Who would have thought..

[Lostmeringtopaddypower]

They could show repeats of "Hands" and revive some long-gone trades like Peig-Stuffing and Mule Carrying.

[johnmcork]

people started to shit the course when it emerged after the last census that one in six houses was unoccupied.
fact of the matter is that most landlords are off the books/under the table. they shot themselves in the foot by not paying tax. there is actually way more houses occupied than people think.
bottom line; landlords need to register for tax (anyway)

[Beaty]

people started to shit the course when it emerged after the last census that one in six houses was unoccupied.
fact of the matter is that most landlords are off the books/under the table. they shot themselves in the foot by not paying tax. there is actually way more houses occupied than people think.
bottom line; landlords need to register for tax (anyway)

Do we! lol

S

[i_didnt_do_nawtin]

Its down 40% in all areas outside of the city, in some cases more.
A brand new 4 bedroom house with all mod cons in Fermoy for €400, first month free.
Who would have thought..

Holy shit, I pay more than that for a room

[Proinsias]

Holy shit, I pay more than that for a room

I paid more than that for a room in Reading, 5 years ago.

[Lostmeringtopaddypower]

Its down 40% in all areas outside of the city, in some cases more.
A brand new 4 bedroom house with all mod cons in Fermoy for €400, first month free.
Who would have thought..

Which would put a fair price of ca. €70,000 on the house.

Sounds about right for Fermoy.

[doppellanger]

Which would put a fair price of ca. €70,000 on the house.

Sounds about right for Fermoy.

The town the boom forgot.

Quinn Life gone, FCI gone, "business park" still a field almost ten years after the army barracks closed.

Once O'Brien's sandwiches closes there will be nothing in the town but the swimming pool and the library.

Come Armaggeddon Come!

[corkoniense]

There seems to have been a substantial miscalculation, particularly in the case of secured bonds.

However, there would probably have been two arguments
A complete collapse one of the big banks would have been calamitous for the Irish economy. Wages wouldn't have been paid; businesses wouldn't be able to pay their bills. A lot of good businesses would have gone to the wall because they had no access to their bank facilities.
If reneging on bonds had led to the collapse of a pension fund, it could have led to huge numbers of people opting out of private pension schemes. This could have had massive long-term consequences for the state.


The real question is what the government could have done instead. The obvious alternatives would have been nationalisation or buying massive equity stakes in the banks.

Both of those would probably have protected the bondholders as well, just not as explicitly. However, it would have screwed over the shareholders. And that's the real question. Why did the government act to bail out the bank shareholders?

That and how they ever allowed the mess to get where it is.

They have let Anglo fail. And Irish Nationwide. This will beggar us for generations, and all because of the Galway Tint.

[jd26]

I should clarify.

The big banks are AIB, Bank of Ireland and possibly IL&P.

If any of the others collapsed, it wouldn't have been pretty for a brief period, but that would have been it. Whether they may or may not have been completely covered by existing guarantees, too many businesses and individuals could have found their accounts frozen when the mess was being sorted out for any of those three to have been allowed fail.

[Proinsias]

I should clarify.

The big banks are AIB, Bank of Ireland and possibly IL&P.

If any of the others collapsed, it wouldn't have been pretty for a brief period, but that would have been it. Whether they may or may not have been completely covered by existing guarantees, too many businesses and individuals could have found their accounts frozen when the mess was being sorted out for any of those three to have been allowed fail.

The failure of Anglo would have created untold systematic problems.

It would have been utterly impossible for BOI and AIB to have obtained funds anywhere. As it was, it was very, very difficult, only possible because the Irish government implicitly backed them.

So if Anglo was to have been let fail, I'm 100% certain BOI, AIB and IL&P would now be state run companies.

[Lostmeringtopaddypower]

The failure of Anglo would have created untold systematic problems.

It would have been utterly impossible for BOI and AIB to have obtained funds anywhere. As it was, it was very, very difficult, only possible because the Irish government implicitly backed them.

So if Anglo was to have been let fail, I'm 100% certain BOI, AIB and IL&P would now be state run companies.

They may still end being state run, though.

Anglo was indeed let fail - it will almost certainly wound up.
The only thing the government did here was to pass the billions of debt incurred by a private bank on to the irish taxpayer. Telling the international money markets - "look, it's okay, you can do what you want in our country - if the worst comes to the worst - we always have the taxpayer"
What kind of message does this send to a banker?
Plus the billions pumped into Anglo were written off immediately.
The money could just as well been thrown into the Liffey.


Yes, a Lehmann-like instant collapse would have screwed the country for a few weeks - but it would have been better for the country in the long run.

The grandchildren of todays taxpayer will be paying off Anglos debts.

[Proinsias]

They may still end being state run, though.

Anglo was indeed let fail - it will almost certainly wound up.
The only thing the government did here was to pass the billions of debt incurred by a private bank on to the irish taxpayer. Telling the international money markets - "look, it's okay, you can do what you want in our country - if the worst comes to the worst - we always have the taxpayer"
What kind of message does this send to a banker?
Plus the billions pumped into Anglo was written of immediately.
The money could just as well been thrown into the Liffey.


Yes, a Lehmann-like instant collapse would have screwed the country for a few weeks - but it would have been better for the country in the long run.

The grandchildren of todays taxpayer will be paying off Anglos debts.

I'm not so sure.

Taking on immediately the vast levels of debt that AIB and BOI have, IIRC, they have up to twice GDP between them, would mean Ireland would have found it almost impossible to borrow. At that stage, the ECB was not engaging in quantitative easing. I suspect the IMF would have gotten involved and, if history has taught us anything, it's that when the IMF get involved, countries are truely fucked (and about to get worse, thans to the IMF's disasterous policies that have been demonstrated time and again not to work).

Ireland would have been telling the international community exactly what Iceland told the international community.

As it is, they're treading a fine line, by backing Anglo, they did actually restore a lot of confidence in AIB and BOI in the international money markets and, gradually, they are normalising. I'm not sure I agree with the fact that Anglo was nationalised, but looking at it in hindsight, I see it as possibly the best thing to have done at the time.

Every other situation I can see would have led to disaster.

[Tony Angelino]

whens the imf arriving next year is it

[daithi81]

Around April/May 2011.

[Tony Angelino]

Around April/May 2011.

Cheers time to get the fuck outta here before then :cool:

[Murdock]

I'm not so sure.

Taking on immediately the vast levels of debt that AIB and BOI have, IIRC, they have up to twice GDP between them, would mean Ireland would have found it almost impossible to borrow. At that stage, the ECB was not engaging in quantitative easing. I suspect the IMF would have gotten involved and, if history has taught us anything, it's that when the IMF get involved, countries are truely fucked (and about to get worse, thans to the IMF's disasterous policies that have been demonstrated time and again not to work).

Ireland would have been telling the international community exactly what Iceland told the international community.

As it is, they're treading a fine line, by backing Anglo, they did actually restore a lot of confidence in AIB and BOI in the international money markets and, gradually, they are normalising. I'm not sure I agree with the fact that Anglo was nationalised, but looking at it in hindsight, I see it as possibly the best thing to have done at the time.

Every other situation I can see would have led to disaster.

Thank God our leaders made the right decision so and didn't lead us to disaster.

[exileonpatrickstreet]

the latest beaut from morgan

http://www.irishtimes.com/newspaper/opinion/2010/1108/1224282865400.html?v ia=mr

If you thought the bank bailout was bad, wait until the mortgage defaults hit home

Ireland is effectively insolvent – the next crisis will be mass home mortgage default, writes MORGAN KELLY

SAD NEWS just in from Our Lady of the Eurozone Hospital: After a sudden worsening in her condition, the Irish Patient, formerly known as the Irish Republic, has been moved into intensive care and put on artificial ventilation. While a hospital spokesman, Jean-Claude Trichet, tried to sound upbeat, there is no prospect that the Patient will recover.

It will be remembered that, after a lengthy period of poverty following her acrimonious divorce from her English partner, in the 1990s Ireland succeeded in turning her life around, educating herself, and holding down a steady job. Although her increasingly riotous lifestyle over the last decade had raised some concerns, the Irish Patient’s fate was sealed by a botched emergency intervention on September 29th, 2008 followed by repeated misdiagnoses of the ensuing complications.

With the Irish Patient now clinically dead, her grieving European relatives face the melancholy task of deciding when to remove her from life support, and how to deal with the extraordinary debts she ran up in the last months of her life . . .

WHEN I wrote in The Irish Times last May showing how the bank guarantee would lead to national insolvency, I did not expect the financial collapse to be anywhere near as swift or as deep as has now occurred. During September, the Irish Republic quietly ceased to exist as an autonomous fiscal entity, and became a ward of the European Central Bank.

It is a testament to the cool and resolute handling of the crisis over the last six months by the Government and Central Bank that markets now put Irish sovereign debt in the same risk group as Ukraine and Pakistan, two notches above the junk level of Argentina, Greece and Venezuela.

September marked Ireland’s point of no return in the banking crisis. During that month, €55 billion of bank bonds (held mainly by UK, German, and French banks) matured and were repaid, mostly by borrowing from the European Central Bank.

Until September, Ireland had the legal option of terminating the bank guarantee on the grounds that three of the guaranteed banks had withheld material information about their solvency, in direct breach of the 1971 Central Bank Act. The way would then have been open to pass legislation along the lines of the UK’s Bank Resolution Regime, to turn the roughly €75 billion of outstanding bank debt into shares in those banks, and so end the banking crisis at a stroke.

With the €55 billion repaid, the possibility of resolving the bank crisis by sharing costs with the bondholders is now water under the bridge. Instead of the unpleasant showdown with the European Central Bank that a bank resolution would have entailed, everyone is a winner. Or everyone who matters, at least.

The German and French banks whose solvency is the overriding concern of the ECB get their money back. Senior Irish policymakers get to roll over and have their tummies tickled by their European overlords and be told what good sports they have been. And best of all, apart from some token departures of executives too old and rich to care less, the senior management of the banks that caused this crisis continue to enjoy their richly earned rewards. The only difficulty is that the Government’s open-ended commitment to cover the bank losses far exceeds the fiscal capacity of the Irish State.

The Government has admitted that Anglo is going to cost the taxpayer €29 to €34 billion. It has also invested €16 billion in the other banks, but expects to get some or all of that investment back eventually.

So, the taxpayer cost of the bailout is about €30 billion for Anglo and some fraction of €16 billion for the rest. Unfortunately, these numbers are not consistent with each other, and it only takes a second to see why.

Between them, AIB and Bank of Ireland had the same exposure to developers as Anglo and, to the extent that they were scrambling to catch up with Anglo, probably lent to even worse turkeys than it did. AIB and Bank of Ireland did start with more capital to absorb losses than Anglo, but also face substantial mortgage losses, which it does not. It follows that AIB and Bank of Ireland together will cost the taxpayer at least as much as Anglo.

Once we accept, as the Government does, that Anglo will cost the taxpayer about €30 billion, we must accept that AIB and Bank of Ireland will cost at least €30 billion extra.

In my article of last May, when I published my optimistic estimate of a €50 billion bailout bill, I posted a spreadsheet on the irisheconomy.ie website, giving my realistic estimates of taxpayer losses. My realistic estimate for Anglo was €34 billion, the same as the Government’s current estimate.

When you apply the same assumptions about lending losses to the other banks, you end up with a likely taxpayer bill of €16 billion for Bank of Ireland (deducting the €3 billion they have since received from investors) and €26 billion for AIB: nearly as bad as Anglo.

Indeed, the true scandal in Irish banking is not what happened at Anglo and Nationwide (which, as specialised development lenders, would have suffered horrific losses even had they not been run by crooks or morons) but the breakdown of governance at AIB that allowed it to pursue the same suicidal path.

Once again we are having to sit through the same dreary and mendacious charade with AIB that we endured with Anglo: “AIB only needs €3.5 billion, sorry we meant to say €6.5 billion, sorry . . .” and so on until it is fully nationalised next year, and the true extent of its folly revealed.

This €70 billion bill for the banks dwarfs the €15 billion in spending cuts now agonised over, and reduces the necessary cuts in Government spending to an exercise in futility. What is the point of rearranging the spending deckchairs, when the iceberg of bank losses is going to sink us anyway?

What is driving our bond yields to record levels is not the Government deficit, but the bank bailout. Without the banks, our national debt could be stabilised in four years at a level not much worse than where France, with its triple A rating in the bond markets, is now.

As a taxpayer, what does a bailout bill of €70 billion mean? It means that every cent of income tax that you pay for the next two to three years will go to repay Anglo’s losses, every cent for the following two years will go on AIB, and every cent for the next year and a half on the others. In other words, the Irish State is insolvent: its liabilities far exceed any realistic means of repaying them.

For a country or company, insolvency is the equivalent of death for a person, and is usually swiftly followed by the legal process of bankruptcy, the equivalent of a funeral.

Two things have delayed Ireland’s funeral. First, in anticipation of being booted out of bond markets, the Government built up a large pile of cash a few months ago, so that it can keep going until the New Year before it runs out of money. Although insolvent, Ireland is still liquid, for now.

Secondly, not wanting another Greek-style mess, the ECB has intervened to fund the Irish banks. Not only have Irish banks had to repay their maturing bonds, but they have been haemorrhaging funds in the inter-bank market, and the ECB has quietly stepped in with emergency funding to keep them going until it can make up its mind what to do.

Since September, a permanent team of ECB “observers” has taken up residence in the Department of Finance. Although of many nationalities, they are known there, dismayingly but inevitably, as “The Germans”.

[continued over]

[exileonpatrickstreet]

[continued from above]

So, thanks to the discreet intervention of the ECB, the first stage of the crisis has closed with a whimper rather than a bang. Developer loans sank the banks which, thanks to the bank guarantee, sank the Irish State, leaving it as a ward of the ECB.

The next act of the crisis will rehearse the same themes of bad loans and foreign debt, only this time as tragedy rather than farce. This time the bad loans will be mortgages, and the foreign creditor who cannot be repaid is the ECB. In consequence, the second act promises to be a good deal more traumatic than the first.

Where the first round of the banking crisis centred on a few dozen large developers, the next round will involve hundreds of thousands of families with mortgages. Between negotiated repayment reductions and defaults, at least 100,000 mortgages (one in eight) are already under water, and things have barely started.

Banks have been relying on two dams to block the torrent of defaults – house prices and social stigma – but both have started to crumble alarmingly.

People are going to extraordinary lengths – not paying other bills and borrowing heavily from their parents – to meet mortgage repayments, both out of fear of losing their homes and to avoid the stigma of admitting that they are broke. In a society like ours, where a person’s moral worth is judged – by themselves as much as by others – by the car they drive and the house they own, the idea of admitting that you cannot afford your mortgage is unspeakably shameful.

That will change. The perception growing among borrowers is that while they played by the rules, the banks certainly did not, cynically persuading them into mortgages that they had no hope of affording. Facing a choice between obligations to the banks and to their families – mortgage or food – growing numbers are choosing the latter.

In the last year, America has seen a rising number of “strategic defaults”. People choose to stop repaying their mortgages, realising they can live rent-free in their house for several years before eviction, and then rent a better house for less than the interest on their current mortgage. The prospect of being sued by banks is not credible – the State of Florida allows banks full recourse to the assets of delinquent borrowers just like here, but it has the highest default rate in the US – because there is no point pursuing someone who has no assets.

If one family defaults on its mortgage, they are pariahs: if 200,000 default they are a powerful political constituency. There is no shame in admitting that you too were mauled by the Celtic Tiger after being conned into taking out an unaffordable mortgage, when everyone around you is admitting the same.

The gathering mortgage crisis puts Ireland on the cusp of a social conflict on the scale of the Land War, but with one crucial difference. Whereas the Land War faced tenant farmers against a relative handful of mostly foreign landlords, the looming Mortgage War will pit recent house buyers against the majority of families who feel they worked hard and made sacrifices to pay off their mortgages, or else decided not to buy during the bubble, and who think those with mortgages should be made to pay them off. Any relief to struggling mortgage-holders will come not out of bank profits – there is no longer any such thing – but from the pockets of other taxpayers.

The other crumbling dam against mass mortgage default is house prices. House prices are driven by the size of mortgages that banks give out. That is why, even though Irish banks face long-run funding costs of at least 8 per cent (if they could find anyone to lend to them), they are still giving out mortgages at 5 per cent, to maintain an artificial floor on house prices. Without this trickle of new mortgages, prices would collapse and mass defaults ensue.

However, once Irish banks pass under direct ECB control next year, they will be forced to stop lending in order to shrink their balance sheets back to a level that can be funded from customer deposits. With no new mortgage lending, the housing market will be driven by cash transactions, and prices will collapse accordingly.

While the current priority of Irish banks is to conceal their mortgage losses, which requires them to go easy on borrowers, their new priority will be to get the ECB’s money back by whatever means necessary. The resulting wave of foreclosures will cause prices to collapse further.

Along with mass mortgage defaults, sorting out our bill with the ECB will define the second stage of the banking crisis. For now it is easier for the ECB to drip feed funding to the Irish State and banks rather than admit publicly that we are bankrupt, and trigger a crisis that could engulf other euro-zone states. Our economy is tiny, and it is easiest, for now, to kick the can up the road and see how things work out.

By next year Ireland will have run out of cash, and the terms of a formal bailout will have to be agreed. Our bill will be totted up and presented to us, along with terms for repayment. On these terms hangs our future as a nation. We can only hope that, in return for being such good sports about the whole bondholder business and repaying European banks whose idea of a sound investment was lending billions to Gleeson, Fitzpatrick and Fingleton, the Government can negotiate a low rate of interest.

With a sufficiently low interest rate on what we owe to Europe, a combination of economic growth and inflation will eventually erode away the debt, just as it did in the 1980s: we get to survive.

How low is sufficiently low? Economists have a simple rule to calculate this. If the interest rate on a country’s debt is lower than the sum of its growth rate and inflation rate, the ratio of debt to national income will shrink through time. After a massive credit bubble and with a shaky international economy, our growth prospects for the next decade are poor, and prices are likely to be static or falling. An interest rate beyond 2 per cent is likely to sink us.

This means that if we are forced to repay the ECB at the 5 per cent interest rate imposed on Greece, our debt will rise faster than our means of servicing it, and we will inevitably face a State bankruptcy that will destroy what few shreds of our international reputation still remain.

Why would the ECB impose such a punitive interest rate on us? The answer is that we are too small to matter: the ECB’s real concerns lie with Spain and Italy. Making an example of Ireland is an easy way to show that bailouts are not a soft option, and so frighten them into keeping their deficits under control.

Given the risk of national bankruptcy it entailed, what led the Government into this abject and unconditional surrender to the bank bondholders? I have been told that the Government’s reasoning runs as follows: “Europe will bail us out, just like they bailed out the Greeks. And does anyone expect the Greeks to repay?”

The fallacy of this reasoning is obvious. Despite a decade of Anglo-Fáil rule, with its mantra that there are no such things as duties, only entitlements, few Irish institutions have collapsed to the third-world levels of their Greek counterparts, least of all our tax system.

And unlike the Greeks, we lacked the tact and common sense to keep our grubby dealing to ourselves. Europeans had to endure a decade of Irish politicians strutting around and telling them how they needed to emulate our crony capitalism if they wanted to be as rich as we are. As far as other Europeans are concerned, the Irish Government is aiming to add injury to insult by getting their taxpayers to help the “Richest Nation in Europe” continue to enjoy its lavish lifestyle.

My stating the simple fact that the Government has driven Ireland over the brink of insolvency should not be taken as a tacit endorsement of the Opposition. The stark lesson of the last 30 years is that, while Fianna Fáil’s record of economic management has been decidedly mixed, that of the various Fine Gael coalitions has been uniformly dismal.

As ordinary people start to realise that this thing is not only happening, it is happening to them, we can see anxiety giving way to the first upwellings of an inchoate rage and despair that will transform Irish politics along the lines of the Tea Party in America. Within five years, both Civil War parties are likely to have been brushed aside by a hard right, anti-Europe, anti-Traveller party that, inconceivable as it now seems, will leave us nostalgic for the, usually, harmless buffoonery of Biffo, Inda, and their chums.

You have read enough articles by economists by now to know that it is customary at this stage for me to propose, in 30 words or fewer, a simple policy that will solve all our problems. Unfortunately, this is where I have to hold up my hands and confess that I have no solutions, simple or otherwise.

Ireland faced a painful choice between imposing a resolution on banks that were too big to save or becoming insolvent, and, for whatever reason, chose the latter. Sovereign nations get to make policy choices, and we are no longer a sovereign nation in any meaningful sense of that term.

From here on, for better or worse, we can only rely on the kindness of strangers.

[POL]

Olli Rehn, that unelected European bollix is now calling the shots as Irish Finance Minster, Lenihan is only his underling at this stage

[Mick Lyons]

I heard Olli Rehn walked into the Dept. of Finance this evening and went around pointing at different people saying "You're shit, you're shit, you're shit" before throwing his briefcase at Brian Lenihan.
It was like Alec Baldwin in Glengarry Glen Ross.

[Danny Strummer.]

Olli Rehn, that unelected European bollix is now calling the shots as Irish Finance Minster, Lenihan is only his underling at this stage

Hopefully anyway i heard lenihan didnt even pass his leaving cert some drunk at the bar was saying that the other night has to be true

[Kappa]

I heard Olli Rehn walked into the Dept. of Finance this evening and went around pointing at different people saying "You're shit, you're shit, you're shit" before throwing his briefcase at Brian Lenihan.
It was like Alec Baldwin in Glengarry Glen Ross.

:D:D

I bet it was exactly like that

[Corcaigh32]

Makes the election a bit interesting - as Ollie says "whatevir abowt intirnal porty polittickel ishews - this 4 year plan is not optionel".

[Michael P Splonk]

Would anyone claim we are a sovereign nation now?

[Corcaigh32]

Me. But then the nature of that sovereignty is very much different with the advent of Maastricht, Nice and Lisbon.

[How bad boy]

Thank God our leaders made the right decision so and didn't lead us to disaster.
I still think that particluar decision, in and of itself, was the right one.

The problem is the thousands of other bad decisions made by the government and the utter lack of a coherent strategy to actually grow our way out of this problem.

[leesider]

I still think that particluar decision, in and of itself, was the right one.

The problem is the thousands of other bad decisions made by the government and the utter lack of a coherent strategy to actually grow our way out of this problem.

They sold out the people to save the irish bankers and elites and the european bankers, mainly the germans but french and brits as well. I had this argument with many friends at the time of the guarantee where they swallowed the gov scare tactics that we wouldn't be able to borrow on the bond markets if the senior bondholders in the banks took the hit. Argument against this was that the sovereign debt would explode and we wouldn't be able to borrow on the bond markets anyway but that instead the taxpayer would have to pay all of the debt.......all of this has come to pass now that the gov sold out.

The main questions I would like to ask now is why did our government bend over and who was applying the pressure and what were the threats being made?? The government had its reasons but what were they??

[How bad boy]

They sold out the people to save the irish bankers and elites and the european bankers, mainly the germans but french and brits as well. I had this argument with many friends at the time of the guarantee where they swallowed the gov scare tactics that we wouldn't be able to borrow on the bond markets if the senior bondholders in the banks took the hit. Argument against this was that the sovereign debt would explode and we wouldn't be able to borrow on the bond markets anyway but that instead the taxpayer would have to pay all of the debt.......all of this has come to pass now that the gov sold out.

The main questions I would like to ask now is why did our government bend over and who was applying the pressure and what were the threats being made?? The government had its reasons but what were they??
No one person or institution controls bond markets.

But the point was correct.

Indeed, the same would almost certainly have happened to AIB and BOI too.

So we would have had a banking system with absolutely no money whatsoever and a government incapable of borrowing.

Instant default, banking system in ruins.


Now this may not seem like such a bad thing, but think about it this way:
Irelnad can't print its own money. If we can't get money from the market, the only other place is the ECB.

The ECB weren't allowed to directly bail out countries at the time, even now it's legally dubious, thanks to rulings in the German supreme court.

Ok, so there's absolutely no source whatsoever of funds (at least, that's how it was at the time, things have changed).
The banks would have had no money whatsoever either, as nobody would give it to them.


Most of the banking in Ireland is done in domestic banks.

If the banks don't have money and the government doesn't have money, then what happens to the average punter on the street?

Yup, panic and civil chaos.

This process could have taken less than a week to manifest. The European Union would probably not have been able to step in on time.


It was ok for Iceland, they had their own currency, they could simply print money and get out of the hole of their banks defaulting that way. Ireland didn't have that option.

Incidentally, this is not a particularly strong case for membership of the Euro. There is a good chance that, given that situation and to save the Euro, the ECB would have stepped in.

Would I take that gamble?

No.

[o_2_b_a_rebel]

Lads, enough. You lot will talk down our economy if ye keep up this carry on.

[mr m]

There was some Latvian guy on Pat Kenny this morning explaining the effect the IMF had on their country. Didn't sound all that bad really.

That economist fellow from newstalk was on the box last night and he was sort of intimating that the IMF might be better option than an ECB bailout as the likes of corporation tax mightn't be attacked for the simple reason that the ECB, in essence, contain our trading partners who aren't exactly enamored with the advantage this gives us in attracting foreign investment.

I don't trust this government or FG/Labour to make the necessary hard decisions that have to be made. Might be best to just get it over and done with and move the hell on.

[Rebelred]

Lads, enough. You lot will talk down our economy if ye keep up this carry on.

'Sitting on the sidelines, cribbing and moaning is a lost opportunity. I don't know how people who engage in that don't commit suicide because frankly the only thing that motivates me is being able to actively change something,'

[irlandesa]

Interesting OP-Ed from the IT last week:

...
...
By converting a portion of Allies Irish Banks’ approximately €40 billion of bonds, and Bank of Ireland’s €50 billion, into shares, each institution can be recapitalised. Transferring ownership to bond holders will not cost the taxpayer a cent and will avoid interminable legal battles over the transfer of assets to Nama.

While the shaky state of Irish banks had been worrying investors since early 2007, when the crisis finally broke in late September the Government was taken completely by surprise and reacted with blind panic. Faced with a run on Anglo Irish Bank by institutional depositors on September 29th, the Government was stampeded into guaranteeing virtually all liabilities, except shares, of the six Irish banks.

This guarantee contained two obvious but fundamental flaws. Everything that has happened since – the proposed recapitalisation of Anglo, the nationalisation of Anglo, the establishment of Nama – can be understood as the Government scrambling to catch up with the consequences of these two errors.

The first mistake was to guarantee not only deposits – which had to be guaranteed – but also most of the existing bonds issued by banks to other financial institutions. Bond holders receive higher returns in the knowledge that they are accepting the risk of losses on their investment. In addition, unlike depositors who can scarper, existing bond holders are effectively stuck.

It made no sense for the Government to insist that taxpayers would take the hit on any bank losses instead of the financial institutions that had already entered legal contracts to do so.

The second mistake was to extend the guarantee to Anglo Irish and Irish Nationwide. As specialised property development lenders with incompetent management, they were at risk of heavy losses as their market collapsed, and fulfilled no role in the wider economy.

In making the guarantee on September 29th, I do not doubt that the Government believed that the difficulties of Irish banks ran no deeper than temporary liquidity problems stemming from the international crisis. However, as it has become apparent that Anglo was a mismanaged wreck, with AIB and Bank of Ireland scarcely better, the Government has stuck with the mantra that all banks are equally important and equally worth saving at any cost to the taxpayer.

Brian Lenihan and Brian Cowen are happier to dice with national bankruptcy than lose face by admitting that they were misled about the state of Irish banks last September.

Nama, then, is the latest twist in the Government’s increasingly bizarre efforts to save the Irish banking system while claiming that it does not really need to be saved.

Underlying Nama is the delusion that the collapse of our property bubble is a temporary downturn. In a few years time when the global economy recovers we will be back building houses like it was 2006. All the ghost estates, empty office blocks, guest-less hotels and weed choked fields that Nama has bought on our behalf will once again be worth a fortune.

The reality is that, because of our surfeit of empty housing, there will be almost no construction activity for the next decade. Empty apartment blocks in Dublin will eventually be rented, albeit at rates so low that many will decay into slums. However, most of the unfinished estates that litter rural Ireland – where the only economic activity was building houses – will never be occupied.

Nama is a variant on the “Cash for Trash” scheme briefly floated in the United States last year where the government would recapitalise banks by overpaying for their bad loans. Our Government is proposing to buy €90 billion of loans and will reportedly pay €75 billion for them.

The International Monetary Fund (IMF) guesses that Nama will cost us €35 billion, and this is probably optimistic. The narrowness of the Irish property market meant that banks effectively operated a pyramid scheme, bidding up prices against each other. Now that banks cannot lend, development assets are effectively worthless.

The taxpayer is likely to lose well over €25 billion on Anglo alone. Among its “assets” are €4 billion lent for Irish hotels, and almost €20 billion for empty fields and building sites. In fact, I suspect that the €20 billion already repaid to the casino that was Anglo represents winners cashing in their chips, while the outstanding €70 billion of loans will turn out to be worthless. And it is well to remember, as the architects of Nama have not, that although the problems of Irish banks begin with developers, they do not end there.

The same recklessness that impelled banks to lend hundreds of millions to builders to whom most of us would hesitate to lend a bucket; also led them to fling tens of billions in mortgages, car loans, and credit cards at people with little ability to repay. Even without the bad debts of developers, the losses on these household loans over the next few years will probably be sufficient to drain most of the capital out of AIB and Bank of Ireland.

Brian Lenihan’s largesse to bond holders could cost you and me €50 to €70 billion. What do numbers like these mean?

The easiest way to put numbers of this magnitude into perspective is to remember that in 2008 the Government generated €13 billion in income tax. Every time you hear €10 billion, then, think of paying 10 per cent more income tax annually for the next decade.

In other words, the fiscal capacity of a state with only two million taxpayers, and falling fast, is frighteningly thin. Ten billion here, and ten billion there and, before you know it, you are talking national bankrutcy. Even without bankrupty, Nama will ensure a crushing tax burden for everyone in Ireland for decades.

The tragedy is that, were it not for the Government’s botched efforts to save financiers from the predictable consequences of their own greed, the Irish economy would have recovered far more quickly than most people, including the IMF, expect.

Recovery for the Irish economy will not be easy – there is no painless way for an economy to move from getting about 20 per cent of its national income from construction to getting about zero – but the flexibility of the Irish labour market would have ensured that our incomes and share of global trade would have rapidly recovered. Now, however, any fruits of recovery will be squandered on Nama.

Aside from the fact that Nama will spend huge sums to achieve little, its governance is problematic. Here, the fog of secrecy that has quietly settled over Anglo Irish since nationalisation sets an unsettling precedent.

After revelations of financial irregularities forced the resignation of three executive directors, Anglo moved decisively to replace them with . . . Anglo insiders. Most astonishing, in the light of the scandal over Irish Nationwide deposits, was the decision to replace Anglo’s disgraced financial director with his immediate subordinate, Anglo’s chief financial officer.

It is hard not to conclude that a deliberate decision has been made at the highest level of Government that what happened in Anglo, stays in Anglo. And we can expect Nama to be run in the same tight manner.

While there has been considerable speculation about dark motives for bailing out developers and banks, I do not believe that the Government’s behaviour has been corrupt: it has been far worse. At least corruption implies a sense that you are doing wrong, and need to be paid in return. Our Government actually thought it was doing the right thing in risking everything to safeguard the interests of developers who had given us an economy that was the envy of Europe.

Instead of recognising bankers and developers as parasites on our national prosperity, the Government came to see them as its source. While everyone else in Ireland has come to see the past decade as an embarrassing episode of collective insanity to be put behind us as soon as possible, the Government still sees it as the high point of our nation’s history. Nama is effectively Fianna Fáil’s shrine to the bubble, and likely to be an expensive and enduring one.

What should be done instead of Nama? First, we need to understand how the idea of Nama follows from a mistaken analogy with the Swedish banking crisis and bad bank of the early 1990s. The Swedish banks differed in one fundamental way from ours: they only had deposits as liabilities. If their government had not taken over their bad debts, ordinary depositors would have suffered. By contrast, Irish banks had borrowed heavily from other financial institutions through bonds, and these bondholders originally agreed to take losses if Irish banks got into difficulties.

OK, I don't understand these things, but, let's see if I got it right:

1) You convert the bonds into shares
2) Bondholders are now shareholders
3) They own the banks
4) They will probably run them a damn sight better than the incompetent cronyist Galway tent shitehawks that have been in charge so far
5) Problem over

It all sounds a bit magic wand.
What are the possible down sides?

[irlandesa]

The town the boom forgot.

Quinn Life gone, FCI gone, "business park" still a field almost ten years after the army barracks closed.

Once O'Brien's sandwiches closes there will be nothing in the town but the swimming pool and the library.

Come Armaggeddon Come!

Poor oul' Fermoy:cry:

[daithi81]

Morgan is a fucking wanker.

[tobyscoby]

Morgan Kelly or Morgan Stanley?

[kidneybeans]

both FF/Greens and the opposition are only interested in saving themselves and their developer/investor/banking friends. None of them give the slightest sh** about the taxpayer. Last week that piece of s*** McDaid got €300,000 plus a "pension" of €90,000 a year of our money at a time when they are looking to increase everyones tax, reduce welfare payments to those who are on the breadline and have sold the lot of us to the bankers. They are only laughing at the public who are doing f all. There will be no solution that favours the taxpayer ever implemented. The only hope the public has is overthrowing the government and refusing to pay the debts of the gamblers who run the banks. But that won't happen in a country like this that cares more about X-factor and a DJs mickey

[leesider]

No one person or institution controls bond markets.

But the point was correct.

Indeed, the same would almost certainly have happened to AIB and BOI too.

So we would have had a banking system with absolutely no money whatsoever and a government incapable of borrowing.

Instant default, banking system in ruins.


Now this may not seem like such a bad thing, but think about it this way:
Irelnad can't print its own money. If we can't get money from the market, the only other place is the ECB.

The ECB weren't allowed to directly bail out countries at the time, even now it's legally dubious, thanks to rulings in the German supreme court.

Ok, so there's absolutely no source whatsoever of funds (at least, that's how it was at the time, things have changed).
The banks would have had no money whatsoever either, as nobody would give it to them.


Most of the banking in Ireland is done in domestic banks.

If the banks don't have money and the government doesn't have money, then what happens to the average punter on the street?

Yup, panic and civil chaos.

This process could have taken less than a week to manifest. The European Union would probably not have been able to step in on time.


It was ok for Iceland, they had their own currency, they could simply print money and get out of the hole of their banks defaulting that way. Ireland didn't have that option.

Incidentally, this is not a particularly strong case for membership of the Euro. There is a good chance that, given that situation and to save the Euro, the ECB would have stepped in.

Would I take that gamble?

No.

You are looking at it in black and white, don't save the banks or do and hence the guarantee should have been brought in or it shouldn't.

I believe that a guarantee should have been brought in but not "the" guarantee ie. depositors totally guaranteed to stop a run on the banks, go in and see the scale of the problems in the banks then set up a resolution process and transfer ownership of those banks that would require too much funding ie. Anglo and maybe AIB to the bondholders........d one gradually and not all at once. The boys in the bond markets are smart enough to realise now that Ireland is insolvent so they won't lend to us......don't you think that if we didn't have this burden they would be smart enough to realise that our deficit is well controllable?? So why would they punish us when thy can make money from us?? The assumption made and scare tactics by government would not have come about IMO and if they did not to the scale we are experiencing now!!

I still think there has been unbelieveable pressure from Germany and its bankers and our government capitualted but in the porcess managed to save their buddies in the higher echelons of Irish society!!

[rubbish mouth breath]

no Budget thread is there?
http://twitter.com/LouiseHannon1#
8% off welfare = €62.72 a month....Prof John O'Hagan TCD #rtenewsatone....

[Lostmeringtopaddypower]

Morgan is a fucking wanker.

You're just jealous because he's a professor and you're not daithi.

[daithi81]

You're just jealous because he's a professor and you're not daithi.

He gives the word a bad name. The man doesn't give a fuck about anything but his little essays in the IT. Awful, awful lecturer.

[How bad boy]

You are looking at it in black and white, don't save the banks or do and hence the guarantee should have been brought in or it shouldn't.

I believe that a guarantee should have been brought in but not "the" guarantee ie. depositors totally guaranteed to stop a run on the banks, go in and see the scale of the problems in the banks then set up a resolution process and transfer ownership of those banks that would require too much funding ie. Anglo and maybe AIB to the bondholders........d one gradually and not all at once. The boys in the bond markets are smart enough to realise now that Ireland is insolvent so they won't lend to us......don't you think that if we didn't have this burden they would be smart enough to realise that our deficit is well controllable?? So why would they punish us when thy can make money from us?? The assumption made and scare tactics by government would not have come about IMO and if they did not to the scale we are experiencing now!!

I still think there has been unbelieveable pressure from Germany and its bankers and our government capitualted but in the porcess managed to save their buddies in the higher echelons of Irish society!!
I agree.

There were dozens of opportunities to avoid fucking up as badly as the government has.

Still though, it was always going to be a shitstorm either way.

[jams]

we've hit 10% !!!

[leesider]

I agree.

There were dozens of opportunities to avoid fucking up as badly as the government has.

Still though, it was always going to be a shitstorm either way.

If we weren't having to stump up for the banks it wouldn't be half the shit storm it is.......the bond markets are looking at that 50 billion and going holy fuck as are the rest of us......take that out of the equation and it isn't too bad at all compared with other countries!

Who is up for quarter of a shit storm instead of a full one!!! :-)

[polarbear]

Maybe this has already come up, but I'm wondering why people who never bought into the Celtic pussycat are now being expected to bail out not just banks etc but also the idiots who bought overpriced badly built houses they couldn't afford.? just wondering mind.

[Lostmeringtopaddypower]

Maybe this has already come up, but I'm wondering why people who never bought into the Celtic pussycat are now being expected to bail out not just banks etc but also the idiots who bought overpriced badly built houses they couldn't afford.? just wondering mind.

So we can turn a corner.

[i_didnt_do_nawtin]

Maybe this has already come up, but I'm wondering why people who never bought into the Celtic pussycat are now being expected to bail out not just banks etc but also the idiots who bought overpriced badly built houses they couldn't afford.? just wondering mind.

Because Ireland is a socialist country and my money is your money.

[Hang_Sandwich]

Because Ireland is a socialist country and my money is your money.

capitalist when it suit the money men - and socialist when it suits the money men.

Ireland has very capitalist laws and governance(ie let business do what it wants) which probably led to the issue in the first place. - however a quick u-turn when things go bad is the problem for the people.

i'd honestly like to see a vote on whether the public should pay for the banks or not - i believe that the banks should have been let fail. shareholders loose out - who cares thats the risk of being a shareholder, bondholder become the new owners (ie the state) they rebuild the bank and sell it on...

then all we have to deal with is the fact that about 50% of the people leaving school in the last few years were becoming trades men and accountants.

[How bad boy]

capitalist when it suit the money men - and socialist when it suits the money men.

Ireland has very capitalist laws and governance(ie let business do what it wants) which probably led to the issue in the first place. - however a quick u-turn when things go bad is the problem for the people.

i'd honestly like to see a vote on whether the public should pay for the banks or not - i believe that the banks should have been let fail. shareholders loose out - who cares thats the risk of being a shareholder, bondholder become the new owners (ie the state) they rebuild the bank and sell it on...

then all we have to deal with is the fact that about 50% of the people leaving school in the last few years were becoming trades men and accountants.
That's not really capitalism, that's more free market fundamentalism.

Just worth pointing out. The father of capitalism, Adam Smith considered The Wealth Of Nations to be read alongside the Theory Of Moral Sentiments, which he considered his true masterpiece.
In the rhetoric of modern America, he would be dismissed as a socialist.

Just thought I should point that out.

[polarbear]

So we can turn a corner.

Y'see that's the point, just saying 'get over it' or 'can we turn a corner' doesn't solve anything. My question is still 'why should I pay for other peoples greed and foolishness?' Seriously, turn a corner so that people who bought (they were grown adults remember) unwisely, get bailed out? Don't think so....It's morally hazardous.

[Lostmeringtopaddypower]

Y'see that's the point, just saying 'get over it' or 'can we turn a corner' doesn't solve anything. My question is still 'why should I pay for other peoples greed and foolishness?' Seriously, turn a corner so that people who bought (they were grown adults remember) unwisely, get bailed out? Don't think so....It's morally hazardous.

So, scores of thousands of people should be evicted from their houses, then re-housed somewhere else by the state - and the banks (who are state owned) holds on to the empty re-possessed houses for another 10 years?

Does this make more sense to you?

[polarbear]

So, scores of thousands of people should be evicted from their houses, then re-housed somewhere else by the state - and the banks (who are state owned) holds on to the empty re-possessed houses for another 10 years?

Does this make more sense to you?

using this emotive language gets us nowhere. People would just be handing back keys, then renting where they could afford....And fine, let the banks(state owned) or otherwise take the hit. It's what they do, it's just business. If people don't like it... tough... emigrate. Life can be hard sometimes....

[blackie]

Ireland 'in preliminary talks with EU on bailout'
Ireland's Prime Minister Brian Cowen in Brussels, October 2010 The Republic of Ireland's government has not formally denied it is in talks with the EU
Continue reading the main story
Global Economy



The Republic of Ireland is in preliminary talks with EU officials for financial support, the BBC has learned.

It is now no longer a matter of whether but when the Irish government formally approaches the European Financial Stability Fund (EFSF) for a bailout.

The provisional estimate for EFSF loans is believed to lie between 60bn and 80bn euros ($82-110bn; £51-68bn).

Irish officials have not denied they are in talks about accessing the EFSF but instead say "it makes no sense".

The European Commission would not formally comment on the matter.

[Tommy O]

A proud moment for the country.

[Proinsias]

It's now almost certain...

[slick fingers]

It looks inevitable now that ireland will give up its low corporation tax. Cunts