Ireland's toxic debt is €130 BILLION+

conlonbmw

This is a very conservative estimate of the real toxic debt that we as taxpayers have agreed to cover.

The banks are still using valuations from the height of the boom.
They hold the valuation of €80 million development still as €80 million, BUT now it will not be built, so now it is only worth land value, which is about 5% of the developed value at most.

This means that 90-95% of the value of current bad debts in our 6 banks lent to speculators is gone.

Anglo €40 billion + to speculators

Everyday some new information pops out, 40 individuals now owe approx €13 billion to this bank. This is INSANE.

BOI €37 billion loaned to speculators

AIB €49 billion loaned to speculators


So just 3 banks have over €120 billion of debt with residual value of about 6 billion.

Taxpayer to cover the other €110 BILLION +

If it takes our government 4 months to work out a way to save 2 billion, sorry 1.4 billion, sorry 900 million after tax relief, how the F*ck are they gonna pay 110 billion, and do not forget that is only 3 banks, 6 banks are covered.

Ireland is finished.

Time Magazine

conlonbmw wrote: »

This means that 90-95% of the value of current bad debts in our 6 banks lent to speculators is gone.

Link?

You're wrong tbh.

P. Breathnach

Just a quibble, Economist: it's a fair guess that "90-95% of the value of current bad debts in our 6 banks lent to speculators is gone" (emphasis added).

The problem is the banks' criteria for reporting bad and doubtful debts. I think OP has a point in mentioning that as an issue. I rather suspect that his or her figures are as unreliable as anything the banks produce.

drunkmonkey

When will we find out the toxic debt, do the banks have to come clean at any stage....I don't know much about it but I think the 7billion already invested is only delaying the inevitable...

jhegarty

I think you math assumes that every property in the country is worth €1, and no other assets exist.

The op is wrong if he's saying all that debt is gone.
Some of it is a lighter shade of bad in that it will be restructured.
A fair percentage of the rest of it will be brought in via repossessing [albeit much reduced in value] secured property.

eoinbn

Not all loans to speculator's will become toxic and not all toxic loans will lose 95% of there value. A house that was bought for €300k but is now valued at €200k is a toxic loan costing €100k. Most 'experts' put the bad debt in the banks at ~€30B.

Also a once of payment of ~€30B is a MUCH smaller issue than an annual defict of €18-20B.

P. Breathnach

eoinbn wrote: »

Not all loans to speculator's will become toxic and not all toxic loans will lose 95% of there value. A house that was bought for €300k but is now valued at €200k is a toxic loan costing €100k...

If the borrower continues to meet his or her obligations, then I would not count that a toxic loan.

Muggy Dev

Morgan Kelly´s article in last weeks Irish Times chillingly highlights this problem.

http://tinyurl.com/b6ao2n

silverharp

A big issue here is projections going forward, how much bad debt will there be if and when unemployment gets to 20%? Interest rates are in double digits? and everyone is paying several % points more tax?
A debt that looks payable now could be a nightmare in a years time. It doesnt take a genious to work out that property prices are going back to pre 2000 levels.

is_that_so

silverharp wrote: »

A big issue here is projections going forward, how much bad debt will there be if and when unemployment gets to 20%? Interest rates are in double digits? and everyone is paying several % points more tax?

Tax increases are inevitable even if the Government are the only ones who can't see it. I am not sure where the rest of this can occur. Even in the 80s we only hit 20% briefly and as the ECB controls rates, I can't see where double digit rates will come from. We have been close to double digits on personal loans/overdrafts for some years anyway and CC rates have always been well above that.

I will say that seeing as no-one really knows how we get to the end of this the OP could be right. However, as others have posted there is no information on the colour of all of these debts and it is really not too unlike some of the "what if" intellectual exercises that the likes of Morgan Kelly et all have indulged in.
Like the rest of us, they really don't have any answers, only possible scenarios.

eoinbn

P. Breathnach wrote: »

If the borrower continues to meet his or her obligations, then I would not count that a toxic loan.

hence the "Not all loans to speculator's will become toxic"

silverharp

is_that_so wrote: »

Tax increases are inevitable even if the Government are the only ones who can't see it. I am not sure where the rest of this can occur. Even in the 80s we only hit 20% briefly and as the ECB controls rates, I can't see where double digit rates will come from. We have been close to double digits on personal loans/overdrafts for some years anyway and CC rates have always been well above that.

I'd wager this will be worse then the 80's as Ireland was trading with a growing Global economy at the time, now everyone is in the toilet at the same time.

As for rates, if the gov. will have to pay increasing rates of interest to borrow money, mortgage rates and comercial borrowing rates will go up as well.

and yes thet are scanarios but the problem is I dont hear plauible projections being put forward. There is a good history from elsewhere to get a general idea. Yet all I see is the deer in the headlights approach from the great and the good and some form of fluffy hope for the best.

is_that_so

I agree there are no plausible projections and tbh none are likely beyond the pessimists erring on the side of caution and throwing up the monstrous numbers in this thread. I don't think it should all be about the banking sector even though it has the potential to down us all, ultimately it leads to a negative feedback loop. I think the restoration of some level of credibility in the banking sector, which will take some time, is essential but numbers like this merely serve to invite the sharks to circle and put even more pressure on our system.

I don't however share your pessimism in relation to other areas, mostly because actions and options are available to help to mitigate those problems. That said I think 12% unemployment is conservative and we might, albeit briefly, end up with closer to 15%. One important feature versus the 80s is that we are a part of the Euro and as Trichet has pointed out we benefit from its protection.

We have access to the ECB, EIB and other EU funds. The EU is due to come up with its own plan soon. At home we have the re-insulation scheme, for the little it may do, the redirection of infrastructure funds towards school building as well as the likes of BOI and AIB creating funds ,belatedly maybe, for small business and first time buyers.

They may all be small things but collectively they do indicate that there are options than can help nudge us however slowly in the right direction. I am of the opinion that this is far more important to us at this current time than where the banks may land us. More importantly we badly need an economic plan and I am more put out by the absence of one than the inability of anyone to come up with accurate projections of the banks' liabilities.

Time Magazine

P. Breathnach wrote: »

Just a quibble, Economist: it's a fair guess that "90-95% of the value of current bad debts in our 6 banks lent to speculators is gone" (emphasis added).

Indeed you are right, good sir. I had to go and quote the one bit of the post that didn't support my argument :pac:

Dannyboy83

P. Breathnach wrote: »

If the borrower continues to meet his or her obligations, then I would not count that a toxic loan.

Precisely, there may be catastrophic negative equity, but these loans are not necessarily toxic if the repayments are met.

What do you think are the chances that we will see Hyperinflation?

This may kill a lot of this debt off (and bankrupt any savers left in the country).

For the savers, its kind of like being dry humped by Fianna Fail, and then they come back and gouge your eyes out, just because.

P. Breathnach

Dannyboy83 wrote: »

...What do you think are the chances that we will see Hyperinflation?...

I see no reason to be concerned about it.

Oddly, people have not been discussing the money supply very much. I think it is contracting, but I haven't gone looking for data.

nesf

Dannyboy83 wrote: »

What do you think are the chances that we will see Hyperinflation?

Almost nil while we are in the Eurozone. The rest of it wouldn't allow us to print banknotes at a high enough rate to cause it, for good reasons.

P. Breathnach

P. Breathnach wrote: »

Oddly, people have not been discussing the money supply very much. I think it is contracting, but I haven't gone looking for data.

Having posted this, I decided to have a little dig around to see if data was hanging about in a convenient place. I found this: http://www.irishtimes.com/newspaper/opinion/2009/0123/1232474674966.html

nesf

P. Breathnach wrote: »

Oddly, people have not been discussing the money supply very much. I think it is contracting, but I haven't gone looking for data.

The money supply is contracting here. People aren't discussing it because it's a relatively abstract concept and not as easily sensationalised as the "Golden Circle" et al.

Page 10 of this report: https://www.centralbank.ie/data/MonthStatFiles/12%20-%20December%20%2008.pdf is what he's referring to in the Irish Times article you linked.

yoshytoshy

The amounts that are discussed in the thread are the banks debts.
Is it fair to take into account the cash people in ireland have ,in their own accounts ?
Seemingly there are loads of irish with a fair amount of money in the bank and they just aren't spending.

P. Breathnach

nesf wrote: »

... Page 10 of this report: https://www.centralbank.ie/data/MonthStatFiles/12%20-%20December%20%2008.pdf is what he's referring to in the Irish Times article you linked.

Thank you. Saved for perusal when my brain is capable of assimilating numbers of more than two digits.

Dannyboy83

nesf wrote: »

Almost nil while we are in the Eurozone. The rest of it wouldn't allow us to print banknotes at a high enough rate to cause it, for good reasons.

I was under the impression that the UK are part of the ERM despite not being part of the EMU, and the rules governing the printing supply and demand apply to the ERM, while the EMU is controlled by the ECB in Frankfurt.

At the moment, the Brits are printing lots of cash.
How are they legally allowed to do that?

Do you think the lack of cohesion between EU members is going to cause a loss of confidence in the Euro?

Dannyboy83

yoshytoshy wrote: »

The amounts that are discussed in the thread are the banks debts.
Is it fair to take into account the cash people in ireland have ,in their own accounts ?
Seemingly there are loads of irish with a fair amount of money in the bank and they just aren't spending.

With the government guarantee on debts and deposits, there has never been a more secure time to save.

With the low and falling interest rates, there has never been a more fruitless time to save.

SkepticOne

Dannyboy83 wrote: »

I was under the impression that the UK are part of the ERM despite not being part of the EMU, and the rules governing the printing supply and demand apply to the ERM, while the EMU is controlled by the ECB in Frankfurt.

At the moment, the Brits are printing lots of cash.
How are they legally allowed to do that??

They dropped out of ERM after Black Wednesday and never reentered, afaik.

Dannyboy83

P. Breathnach wrote: »

Thank you. Saved for perusal when my brain is capable of assimilating numbers of more than two digits.

As an aside, its probably not suprising that the money supply is contracting.

It looks like we're taking a completely different path to the UK
i.e.
The UK are attempting to stimulate their economy and free up money.
Ireland are not only failing to stimulate, we're introducing further taxes (such as the Airport taxes, levies etc.)




Do you think that Euro membership is a cause of this?

(For example, being in the Euro has prevented a catastophe similar to Iceland, while at the same time binding our arms and legs because we instead of being able to maouvere as a small little country, we are part of a massive flotilla of EMU members)

Dannyboy83

SkepticOne wrote: »

They dropped out of ERM after Black Wednesday and never reentered, afaik.

Quite correct, thank you.

nesf

Dannyboy83 wrote: »

Do you think that Euro membership is a cause of this?

No, the cause of the new taxes is our ballooning budget deficit not Euro membership. As long as our budget deficit is large borrowing money will be expensive for us ergo the need to raise taxes/cut spending etc. Raising taxes in the teeth of a recession is not a great idea but allowing a deficit to grow even quicker is an even worse one. Take a look at Irish bond prices if you want to see why.

The Brits can print what they want by the way, they are totally outside the Euro Monetary System, they've not even pegged the Sterling to a certain exchange rate with the Euro etc.

SkepticOne

Dannyboy83 wrote: »

Do you think that Euro membership is a cause of this?

(For example, being in the Euro has prevented a catastophe similar to Iceland, while at the same time binding our arms and legs because we instead of being able to maouvere as a small little country, we are part of a massive flotilla of EMU members)

While there is a possibility that Ireland would have gone down the Iceland route (this would have involved the banks going mad with international lending on a huge scale) it is also true that Ireland would have retained control of its own interest rates. Most people believe that interest rates would have been much higher in the post Euro period than they were so the housing bubble and construction boom that has got our banks into such trouble may not have been so great.

Having said that, it is probably not an option now to leave the Eurozone as most of our borrowings would still be in Euros. As the Irish currency devalued, we would find our mortgages getting more expensive.

yoshytoshy

Dannyboy83 wrote: »

With the government guarantee on debts and deposits, there has never been a more secure time to save.

With the low and falling interest rates, there has never been a more fruitless time to save.

The monies though that are in accounts at this time ,there is obviously a lot of people in Ireland who have some wealth.
Surely this is a factor of a countries wealth as much as the banks are. Obviously no good to the unemployed ,but still something to keep part of the economy going.

silverharp

SkepticOne wrote: »

it is also true that Ireland would have retained control of its own interest rates. Most people believe that interest rates would have been much higher in the post Euro period than they were so the housing bubble and construction boom that has got our banks into such trouble may not have been so great.

In theory it might have been true but the credit boom was so big that the global markets would have made cheap cash available to Ireland. You only have to look at the UK to see that it didnt make any difference. Also the CB here would have been under pressure to stop the punt trading at a premium to Stg.