Ireland's toxic debt is €130 BILLION+

Dannyboy83

nesf wrote: »

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.

I understand that, but isn't the idea to reduce government expenditure rather than create new taxes?

Edit: Or go into Kenysian style defecit spending like the Brits in order to stimulate

Thanks for clearing up the other part.
How can they be inside the Union but plot a different course to everyone else?
Seems odd.

Dannyboy83

SkepticOne wrote: »

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.

Yes, I've read that.
We would have been able to raise interest rates to prevent the economy overheating.
And at the moment we would be able to lower them to stimulate spending.

Looking back on it, everything FF did between stamp duty and the rest simply aggrivated the problem.
Couldn't they have introduced a Land Value Tax or a Property tax that is currently being talked about in government?
http://www.thepropertypin.com/viewtopic.php?f=4&t=18032&start=30

Dannyboy83

yoshytoshy wrote: »

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.

This is part of the fractional reserve issue.
http://en.wikipedia.org/wiki/Fractional-reserve_banking

If you think back to the Anglo fiasco, IL&P did a circular transaction and deposited 7 Billion in Anglo's accounts.
These were passed off as consumer deposits rather than an inter bank exchange, in order to present a much brighter picture than the reality and trick people into investing in the bank and losing their money.
Anlgo was completely over-leveraged and mostly to foreign investors too unless I'm mistaken.

I'm not an expert on this now, so it will be oversimplified but my understanding is that the reason the government gave the guarantee on bank deposits was to prevent a similar effect as happened in the US during the 20s/30s, i.e. Bank Runs, where people queued for hours to take out all their money, for fear of total wipeout during a bank collapse, which consequently caused total wipeout and the collapse of thousands of banks.

To be honest, a lot of what is happening now is a word for word copy of what happened then:
http://en.wikipedia.org/wiki/The_great_depression

Irving Fisher argued that the predominant factor leading to the Great Depression was overindebtedness and deflation. Fisher tied loose credit to over-indebtedness, which fueled speculation and asset bubbles.[10] He then outlined 9 factors interacting with one another under conditions of debt and deflation to create the mechanics of boom to bust. The chain of events proceeded as follows:

1. Debt liquidation and distress selling
2. Contraction of the money supply as bank loans are paid off
3. A fall in the level of asset prices
4. A still greater fall in the net worths of business, precipitating bankruptcies
5. A fall in profits
6. A reduction in output, in trade and in employment.
7. Pessimism and loss of confidence
8. Hoarding of money
9. A fall in nominal interest rates and a rise in deflation adjusted interest rates.[10]

P. Breathnach

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.

Low or negative inflation can compensate for low interest rates.

Dannyboy83

Nesf & P.Breathnach,

I posted this question elsewhere on the forum, but nobody seems to know.
Perhaps one of you will.

The Irish government said that the Irish Pension Reserves were valued at E17 billion Euro prior to September 2008.
These were in the form of assets as far as I'm aware.

Precisely how much have these assets devalued?
What is the current total of the fund?

yoshytoshy

Dannyboy83 wrote: »

This is part of the fractional reserve issue.
http://en.wikipedia.org/wiki/Fractional-reserve_banking

If you think back to the Anglo fiasco, IL&P did a circular transaction and deposited 7 Billion in Anglo's accounts.
These were passed off as consumer deposits rather than an inter bank exchange, in order to present a much brighter picture than the reality and trick people into investing in the bank and losing their money.
Anlgo was completely over-leveraged and mostly to foreign investors too unless I'm mistaken.

I'm not an expert on this now, so it will be oversimplified but my understanding is that the reason the government gave the guarantee on bank deposits was to prevent a similar effect as happened in the US during the 20s/30s, i.e. Bank Runs, where people queued for hours to take out all their money, for fear of total wipeout during a bank collapse, which consequently caused total wipeout and the collapse of thousands of banks.

To be honest, a lot of what is happening now is a word for word copy of what happened then:
http://en.wikipedia.org/wiki/The_great_depression

Thanks for the fractional reserve link ,had a feeling something like that was going on ,never knew about it though.
My dad got a spiel from some bank guy and the guy told him that a lot of irish people have money and just aren't spending it.:rolleyes:

Can't see anything like what happened in the 30's happening again ,things like communications industries will never close down. It will be tough ,but everything is linked together now and theres a drive there that won't sleep (hopefully.)
It's countries in the third world that I'd worry about ,more than our own:(

Dannyboy83

P. Breathnach wrote: »

Low or negative inflation can compensate for low interest rates.

Isn't the problem that we enter into a deflationary spiral?

Or the Brits will suffer stagflation like Japan?

P. Breathnach

This gives some data on the performane of the INPR: http://www.finfacts.ie/irishfinancenews/article_1015016.shtml

Dannyboy83

yoshytoshy wrote: »

Thanks for the fractional reserve link ,had a feeling something like that was going on ,never knew about it though.
My dad got a spiel from some bank guy and the guy told him that a lot of irish people have money and just aren't spending it.:rolleyes:

Can't see anything like what happened in the 30's happening again ,things like communications industries will never close down. It will be tough ,but everything is linked together now and theres a drive there that won't sleep (hopefully.)
It's countries in the third world that I'd worry about ,more than our own:(

Erm...thats my take on it mate, don't take it as gold, my profession is computers, not economics.

From my understanding, the 30s style thing could happen again if we hit high unemployment and hard deflation.

yoshytoshy

Dannyboy83 wrote: »

Erm...thats my take on it mate, don't take it as gold, my profession is computers, not economics.

From my understanding, the 30s style thing could happen again if we hit high unemployment and hard deflation.

One for all and all for one.

P. Breathnach

Dannyboy83 wrote: »

Isn't the problem that we enter into a deflationary spiral?

That's possible, but my inexpert guess is that it won't happen to a serious extent.

I think it was a problem for Ireland that our costs and price levels were higher than the norm for the eurozone. We might actually be driven to a closer alignment with the other members, and I think the net effect of that would be good. But it's very much a net effect, involving a great deal of dislocation: some people here will lose, and some will gain.

Dannyboy83

The Fund's value at 30 September 2008 was €18.7 billion.

The value of the fund was €21. billion in December and the Government's 2008 contribution for the three quarters would be about €1.2 billion.

The Fund has been increasing its cash balances and maintaining a cautious approach to equity investment given the volatile environment that has existed since the onset of the credit crisis. Current cash balances of €1.5 billion (8.0% of the total Fund) represent a 7% overweight cash holding against equities.

The National Pensions Reserve Fund (NPRF) was established in April 2001 to meet as much as possible of the costs of social welfare and public service pensions from 2025 onwards. The Government invests the equivalent of 1% of GNP in the Fund annually. No money can be withdrawn before 2025 and from then on, drawdowns will continue until at least 2055.

that would seem to be refreshingly positive!

Dannyboy83

According to the CSO, during January 2009 the country experienced deflation, with prices falling by 0.1% from the same time 2008.
This is the first time deflation has hit the Irish economy since 1960.
Overall consumer prices decreased by 1.7% in the month.

So why has the price of petrol increase over 10% in Cork in the last 3/4 weeks?

And I've given up shopping in Tesco!

P. Breathnach

Dannyboy83 wrote: »

that would seem to be refreshingly positive!

I am pleased to have contributed to causing a little happiness.

Dannyboy83

P. Breathnach wrote: »

That's possible, but my inexpert guess is that it won't happen to a serious extent.

I think it was a problem for Ireland that our costs and price levels were higher than the norm for the eurozone. We might actually be driven to a closer alignment with the other members, and I think the net effect of that would be good. But it's very much a net effect, involving a great deal of dislocation: some people here will lose, and some will gain.

I guess it would bring us in line with Germany.
Higher taxes, but potentially lower cost of living (bar economy of scale).

In the meanwhile, that would cause mayhem in existing property owners, wouldn't it?

Dannyboy83

P. Breathnach wrote: »

I am pleased to have contributed to causing a little happiness.

LOL, I'll go out on the streets now and tell people to stick around:D

nesf

Dannyboy83 wrote: »

To be honest, a lot of what is happening now is a word for word copy of what happened then:
http://en.wikipedia.org/wiki/The_great_depression

Yes and no. You've got to keep in mind in the US Great Depression there was widespread bank failure that aggravated the situation. The US had an enormous number of banks in the 1930s. It was essentially running a grand natural experiment in "unregulated" banking (i.e. without a central bank) for the previous century with all the booms, busts and bank failures that that brings. This is only one of many aspects of the 1930's depression that was substantially different to what we're seeing in Ireland.

It's really only at a superficial level that you can draw exact parallels between the US Great Depression and what we're going through at the moment. Conversely, we may see more similarities at a global economic level.


Edit: Just to put this in perspective for people. In November and December 1930 608 banks failed where deposits totalling 550 million dollars were lost. No insurance, just lost, gone, vanished. That's the equivalent of 7 billion in today's dollars of people's money just disappearing. The total deposits lost over the period were something like 3 times this amount. Remember deposit insurance by the Government didn't come in until 1933 in the US (and it was the first time it was ever introduced in the world) precisely to try and stem this enormous loss of wealth by people and companies.

Stop for a moment and consider what widespread banking failures in the early 1930s meant prior to the introduction of deposit insurance and only then start to draw parallels between then and today.

Akrasia

Dannyboy83 wrote: »

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

This is the nub of the issue. The developers, speculators and shell companies that owe this debt will only service it if they feel they will eventually be able to turn it into profit.

At the moment, an unknown quantity of the debt owed to the banks is being 'rolled over' because the irish banks are too frightened to try and collect the loans that they know the borrowers can't afford to pay.

The vast majority of property that is in significant negative equity will eventually be handed back to the banks, (not until the debtor has attempted to rearrange his assets so that they can not be taken off him in court proceedings to recover the losses)

These will eventually be sold off in a firesale to whatever billionaires were canny enough to keep liquid assets ready to take advantage of once in a century low prices.

The net effect will be a massive transfer of 'wealth' from the tax payer to a tiny number of extremely wealthy and unscrupulous individuals. ( picking up the lucerative crumbs from the table will be the upper classes, greedy and influential enough to protect their income and wealth through the raft of state cutbacks that will wipe out the savings and incomes of the working poor)

This of course will be happily facilitated by the state who, as underwriters of the losses, will be desperate to ensure that the reposessed assets are liquidated at cents on the euro and may even allow the buyers massive tax reliefs to allow them to hoover up more and more land banks and buildings which they can use to lord over the Irish people for generations to come, creating the next stage of the celtic kleptocracy.


This is the future we are going to see, it will not be any other way.

Dannyboy83

nesf wrote: »

Yes and no. You've got to keep in mind in the US Great Depression there was widespread bank failure that aggravated the situation. The US had an enormous number of banks in the 1930s. It was essentially running a grand natural experiment in "unregulated" banking (i.e. without a central bank) for the previous century with all the booms, busts and bank failures that that brings. This is only one of many aspects of the 1930's depression that was substantially different to what we're seeing in Ireland.

It's really only at a superficial level that you can draw exact parallels between the US Great Depression and what we're going through at the moment. Conversely, we may see more similarities at a global economic level.


Edit: Just to put this in perspective for people. In November and December 1930 608 banks failed where deposits totalling 550 million dollars were lost. No insurance, just lost, gone, vanished. That's the equivalent of 7 billion in today's dollars of people's money just disappearing. The total deposits lost over the period were something like 3 times this amount. Remember deposit insurance by the Government didn't come in until 1933 in the US (and it was the first time it was ever introduced in the world) precisely to try and stem this enormous loss of wealth by people and companies.

Stop for a moment and consider what widespread banking failures in the early 1930s meant prior to the introduction of deposit insurance and only then start to draw parallels between then and today.

Good post & I agree with the distinction.

On a superficial level, a lot of the stuff is word for word. That is, its the same trends as before.

On a deeper level, different things are happening this time that didn't happen in the past (nationalisation of debt instead of wipeouts etc) and governments are reacting differently. The EU, Euro, non-privitisation etc.

SeanW

nesf wrote: »

Yes and no. You've got to keep in mind in the US Great Depression there was widespread bank failure that aggravated the situation. The US had an enormous number of banks in the 1930s. It was essentially running a grand natural experiment in "unregulated" banking (i.e. without a central bank) for the previous century with all the booms, busts and bank failures that that brings. This is only one of many aspects of the 1930's depression that was substantially different to what we're seeing in Ireland.

No, actually the Depression happened for two reasons:
1) The U.S. Congress had in 1913 abdicated its enumerated power to create (gold and silver backed) currency to the new "Federal" Reserve. They promptly began experimenting with fiat currency, which is a root cause of credit bubbles and bursts.
2) After the Crash of '29 the government got involved in a big way. They rented out farms full of crops and levelled them - at a time when people were eating gruel or starving to death - with the intention of keeping prices high. They siezed and destroyed farm animals widely, and even threw a tailor in jail because he charged a customer 35 cents to press a suit when the new Tailors Code fixed that price at 45 cents. Prohibition also took a major industry out of the hands of honest businesspeople and created a thriving, humongous black market.

By contrast there was a massive agricultural/debt crash in 1920 and 1921, but gov't stayed out of the way and the market quickly self-corrected.

nesf

SeanW wrote: »

No, actually the Depression happened for two reasons:

I said aggravated, not caused.

SeanW wrote: »

1) The U.S. Congress had in 1913 abdicated its enumerated power to create (gold and silver backed) currency to the new "Federal" Reserve. They promptly began experimenting with fiat currency, which is a root cause of credit bubbles and bursts.

In fairness to the Fed at the time they were limiting gold inflows into the country limiting the amount of monetary expansion which did put limit the size of the bubble (it could have been much worse). The dollar wasn't a true fiat currency at that time either, the US was still committed to the Gold Standard.

md23040

nesf wrote: »

Yes and no. You've got to keep in mind in the US Great Depression there was widespread bank failure that aggravated the situation. The US had an enormous number of banks in the 1930s.

The American depression was caused by mans obsession of using margin bets on the stock market - these were previously viewed as a one way ticket to wealth. The government at the time where soft and did nothing about it and listened to the assured Wall Street lobby saying it was all okay. Seems history has repeated itself and instead of stocks and margin its houses and leverage. These are all unwinding badly.

ECB 'may back bailout' of countries like Ireland- EU predicts Irish budget shortfalls of 11pc but wants to avoid IMF action
By Ailish O'Hora Wednesday February 25 2009

http://www.independent.ie/business/irish/ecb-may-back-bailout-of-countries-like-ireland-1651903.html

Yesterday’s headline, anyone see this contagion developing along these lines. The banks are given credit lines by the Irish government because they have problems getting money from the markets. The Irish government bonds the debt of all the banks to increase their credit status but it doesn’t work.

Three months later plan b is initiated and loads of money is injected to free liquidity. However because of on-going crisis within the banks the credit line of the country eventually gets called into doubt and bonds for them become more difficult to borrow. It transpires the country is rotten from a financial point of view.

Three months later plan c is initiated and the credit line of the country gets bailed out by the ECB. However because of ongoing crisis within the banks the credit line of the countries it represents deteriorates and eventually ECB bonds become more difficult to borrow. It transpires the ECB is rotten from a financial point of view.

Three months later plan d is initiated and the credit line of the ECB gets bailed out by the World Bank. However because of ongoing crisis within the World Bank the credit line of the countries it represents deteriorates eventually World Bank bonds become difficult to borrow. It transpires the World Bank is rotten from a financial point of view.

Eventually the credit line of the World Bank gets bailed out by Doctor Evil. GAME OVER.

And all this contagion started in 2004 with complex credit derivatives centred on trailer trash in the Florida’s and Carolina’s. Human's IMO are flawed and like the Great Depression the same sound bites of never letting this happen again are being repeated word for word nearly.

ednwireland

probably not the right place but hey

derry

The dip stick regime bet the whole gaff on a throw of the red on the roulete table and garenteed more than 400 Billion or 3 times the GDP of the gaff.
With property going down the tube world wide and the value of fiat money like the Dollar and Euro and Yen going down the toilet we are not just in the Sh!t we are already half drowned just we dont know it yet but the regime knows it as they go through the death pangs of what they did.
Face fact if we have an arse on our trousers in a few years that might be all we have as we work like slaves to suit the whims of the superclass who own the gaff through thier mega banks and EU laws that wont even allow us to exit the EU.
So the real question is "we stuck in the game we definitly gonna lose and worse we cant get out of the game " thanks to the gob smaking stupidty of fecking regime

Derry

P. Breathnach

derry wrote: »

The dip stick regime bet the whole gaff on a throw of the red on the roulete table and garenteed more than 400 Billion or 3 times the GDP of the gaff.
With property going down the tube world wide and the value of fiat money like the Dollar and Euro and Yen going down the toilet we are not just in the Sh!t we are already half drowned just we dont know it yet but the regime knows it as they go through the death pangs of what they did.
Face fact if we have an arse on our trousers in a few years that might be all we have as we work like slaves to suit the whims of the superclass who own the gaff through thier mega banks and EU laws that wont even allow us to exit the EU.
So the real question is "we in the game we gonna lose and worse we cant get out of the game " thanks to the gob smaking stupidty of fecking regime

And your point is...?

derry

P. Breathnach wrote: »

And your point is...?

The whole thing on the international front is a cash burn for the ultra large banks to come in and buy everthing for pennies on the dollar pound whatever
I am being generous that the regime suffers incompatance to do what they did but others figure they deeply embedded in the project so that they get to rule the roost for ever

take your choice it wont matter its either one regime who works for the big banks or another but soone we will be all slaves to the NWO if we allow it to continue

Derry

P. Breathnach

So what can we do about it?

LoveDucati2

We cannot do anything about it, other than having a full scale revolution.

Let the anarchists decide how much punishment the corrupt gov and banks deserve.

I agree with the OP, our debt is at minimum 130 billion. We are F*cked

cavedave

This is not directly connected but, no one will lend us money anymore

The Republic priced a 3-year €4bn deal Wednesday at 170bp over mid-swaps

So, Ireland marginally less risky than an acquisitive Swiss pharma group…

another slightly alarmist view on the cost of borrowing by Ireland

Dannyboy83

md23040 wrote: »

The American depression was caused by mans obsession of using margin bets on the stock market - these were previously viewed as a one way ticket to wealth. The government at the time where soft and did nothing about it and listened to the assured Wall Street lobby saying it was all okay. Seems history has repeated itself and instead of stocks and margin its houses and leverage. These are all unwinding badly.

ECB 'may back bailout' of countries like Ireland- EU predicts Irish budget shortfalls of 11pc but wants to avoid IMF action
By Ailish O'Hora Wednesday February 25 2009

http://www.independent.ie/business/irish/ecb-may-back-bailout-of-countries-like-ireland-1651903.html

Yesterday’s headline, anyone see this contagion developing along these lines. The banks are given credit lines by the Irish government because they have problems getting money from the markets. The Irish government bonds the debt of all the banks to increase their credit status but it doesn’t work.

Three months later plan b is initiated and loads of money is injected to free liquidity. However because of on-going crisis within the banks the credit line of the country eventually gets called into doubt and bonds for them become more difficult to borrow. It transpires the country is rotten from a financial point of view.

Three months later plan c is initiated and the credit line of the country gets bailed out by the ECB. However because of ongoing crisis within the banks the credit line of the countries it represents deteriorates and eventually ECB bonds become more difficult to borrow. It transpires the ECB is rotten from a financial point of view.

Three months later plan d is initiated and the credit line of the ECB gets bailed out by the World Bank. However because of ongoing crisis within the World Bank the credit line of the countries it represents deteriorates eventually World Bank bonds become difficult to borrow. It transpires the World Bank is rotten from a financial point of view.

Eventually the credit line of the World Bank gets bailed out by Doctor Evil. GAME OVER.

And all this contagion started in 2004 with complex credit derivatives centred on trailer trash in the Florida’s and Carolina’s. Human's IMO are flawed and like the Great Depression the same sound bites of never letting this happen again are being repeated word for word nearly.

Just hypothesizing, but I think if Plan C failed, we would be ejected from the EU before Plan D was ever even considered along with Portugal, Greece, Italy and Spain.

Ultimately the EU would be forced to cut the dead weight.

This is extremely unlikely to be honest.
More likely is that we will end up with a minor political revolution and a social democratic party (labour?) who will cut the public sector in half and severely reduce government waste and expenditure.

What is the other alternative?
There is none really.

I doubt FF want to be in office when the IMF will be called in, and if Lisbon II goes tits up, there will be No EU bailout.

TBH, I think even FF have come to the conclusion themselves that in order to sort this mess out, they need to step down and let somebody, anybody, do whats necessary.

FF have always been and always will be a middle of the road party, trying to keep everybody happy.
I think it was Dev himself said - why would you need Labour when you've got Fianna Fail?