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Ireland's Debt Downgraded to Junk Status

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Comments

  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    ei.sdraob wrote: »
    For ****s sake, where have I said the markets or ratings agencies are "perfect", please point to the post.

    Isn't it horrible when someone claims that you said something that you didn't ?

    I'd suggest calming down, though......


  • Registered Users, Registered Users 2 Posts: 12,998 ✭✭✭✭Sand


    @Chuck Stone
    Libertarians, I believe, would argue that markets should not be regulated or rescued when they fail. A large portion of 'our' debt has been acquired because the so called market was not allowed to fail.

    Exactly - the markets were sending clear signals that they were deeply, deeply suspicious of the Irish banks for up to a year or more but still it was presumed that the politicians & DoF were smarter than the markets.

    Only last year we were here with the 750 billion Euro "intimidation" deal, the Greek bailout and the Irish bailout, with the politicians and civil servants again presuming that they were smarter than the markets.

    And here we are now, with politicians and civil servants *still* thinking they're smarter than the markets.

    It reminds me of the infamous putdown by Jimmy Carr, who having destroyed a heckler who thought he was wittier than Mr Carr, encouraged him "Go on, have another go. I do this for a living!"


  • Registered Users, Registered Users 2 Posts: 485 ✭✭Hayte


    steve9859 wrote: »
    And yet most investment firms and even central banks and the ECB still have ratings as the primary investment criteria

    Not surprising at all. The senate subcommittee hearings into the ratings agencies (which you can watch unedited in their entirety on CSPAN) established that they basically give investment firms whatever rating they want.

    If they didn't, investment firms just go to another ratings agency which is willing to give them a more favourable rating. The whole process was described as being like a market share driven race to the bottom.

    Both Moodys and S&P have recently threatened to downgrade US debt in what has been regarded by the likes of Prof. Bradford DeLong as a political move intended to pressure US Congress. I don't think hes wrong.

    That isn't to say that the long term financial outlook of both the US and Ireland isn't bad. It is bad, but firms like Moodys were and still are great facilitators of the global recession and their ratings system has in recent years been exposed as being almost completely arbitrary. The unfortunate thing is that the market still reacts to ratings changes anyway.

    To drive the point home, Moodys downgrade comes just 2 days after the EU/IMF quarterly review which is favourable to Ireland. I wouldn't be surprised if this was more politicking.


  • Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    ei.sdraob wrote: »
    If you took some time to read the report or coverage of you would see the reasons for the downgrades:

    * one of them is Greece
    * another is the "growing likelihood that participation of existing investors may be required as a pre-condition for any future rounds of official financing"

    The report is not all negative, and is quite realistic in its assessment. But of course some people dont like the sound of reality, and would rather continue to live in lala land...

    I don't think anybody is suggesting that Moody's somehow have it in for Ireland - why would they? And, as you say, that's a pretty accurate assessment of the Irish position. None of that means the agencies don't have any conflict of interests, or suggests that we're mysteriously not in a crisis that the European leaders are fumbling their way through very clumsily - you're mostly just misinterpreting what everyone else is saying.

    regards,
    Scofflaw


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Scofflaw wrote: »
    I don't think anybody is suggesting that Moody's somehow have it in for Ireland - why would they? And, as you say, that's a pretty accurate assessment of the Irish position. None of that means the agencies don't have any conflict of interests, or suggests that we're mysteriously not in a crisis that the European leaders are fumbling their way through very clumsily - you're mostly just misinterpreting what everyone else is saying.

    regards,
    Scofflaw

    Did I say anywhere that the ratings agencies would be free from conflict of interest? From the start I have pointed out that blaming the rating agencies is aking to shooting the messenger and deflects from shortcomings of the politicians in handling this crisis, better described here.

    Unlike the state controlled regulators/banks its in their own financial interest to produce accurate reports, on the other hand our very own centralbank/regulator/whateverTheyAreCalledNow were telling us for years that all is rosy with the Irish banks, did anyone even loose a job there over the incompetence that has taken place.

    Rating agencies are no saints, but right now they have more credibility than euro politicians.

    You continue to misrepresent what I am trying to get across, at no point did I either say there is no need for regulations either.


  • Registered Users, Registered Users 2 Posts: 74 ✭✭IRISHREDSTAR


    government policy seems to be based on a cunning plan to borrow as much as they can before we are kicked out of the E.U.
    Hopefully noonan is hiding some of the bailout.


  • Closed Accounts Posts: 6,684 ✭✭✭JustinDee


    ei.sdraob wrote: »
    Rating agencies are no saints, but right now they have more credibility than euro politicians
    No, they most certainly do not. They are equally as self-serving at best.


  • Registered Users, Registered Users 2 Posts: 485 ✭✭Hayte


    ei.sdraob wrote: »
    Did I say anywhere that the ratings agencies would be free from conflict of interest? From the start I have pointed out that blaming the rating agencies is aking to shooting the messenger and deflects from shortcomings of the politicians in handling this crisis, better described here.

    Unlike the state controlled regulators/banks its in their own financial interest to produce accurate reports, on the other hand our very own centralbank/regulator/whateverTheyAreCalledNow were telling us for years that all is rosy with the Irish banks, did anyone even loose a job there over the incompetence that has taken place.

    Rating agencies are no saints, but right now they have more credibility than euro politicians.

    Ratings agencies have precisely zero credibility. The incentive to provide ratings during the housing bubble was dominated by market share, not the desire to produce accurate ratings. If they did produce accurate ratings, there is no way in hell you could have 90% of your triple A rated loans turn to junk in 3 years.

    If you watch the US Senate subcommittee hearings into the global financial crisis you will see that there is a massive breakdown in communication between the technical experts panel (the people responsible for the mathematical modeling of the ratings system) and the ratings agency management panel (the people responsible for allocating personnel, resource and driving market share).

    I'll try to find a direct link to the videos in question because it is worth watching. The technical experts panel was quite open about the perverse incentives, the repeated failure to update mathematical models with new data that would reflect negatively on client ratings, the high ratings applied to stated income loans at New Century Mortgages. etc. The list goes on.

    Then you watch the management panel and the language is completely different. It is evasive. Counsel for one of the management representatives had to intervene before she incriminated herself, which was truly astonishing.

    The role ratings agencies played in the financial crisis is of paramount importance. They were the organisations responsible for calculating investment risk and relaying them to investors in a way they could understand. The only reason why structured financial products like the Anderson CDO had any investors at all is because the residential mortgage backed securities in it were considered to be safe investments by multiple credit rating agencies. This is despite 45% of the Anderson loans coming from New Century Mortgages - a notorious sub prime lender that issued an incredible amount of stated income loans during the bubble and due to poor lending practices eventually blew up in 2007.

    Theres no way you can watch those subcommittee hearings, see the employers and employees of these organisations talking about their job is and what they do every day and suggest that they were only messengers.

    Edit: Video starts here:

    http://www.c-spanvideo.org/program/CreditRat

    Also watch panels 2 and 3. Yes its like 10+ hours long. Yes, its better and more important than anything you will watch on TV when you get home.


  • Closed Accounts Posts: 39,022 ✭✭✭✭Permabear


    This post has been deleted.


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  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    Permabear wrote: »
    This post had been deleted.

    That's my point. I am not liable, and I might yet act in some way to ensure that I don't have to pay. Sure I might even follow Ahern's advice since all these free market profiteers are going to make the world an unbearable place to live in.
    Permabear wrote: »
    This post had been deleted.

    I don't "favor" anything - it's not a word.

    And remind me again why the government felt the misguided need to intervene ? The fact that the market refused to behave. A market that libertarians would have us trust.

    Permabear wrote: »
    This post had been deleted.

    They have (stop the press - we agree) .....they did that just after the world markets (and our own localised profiteers) created an almighty mess and came begging. Yes, they should have been shown the door, but the fact that they even asked and refused to take the consequences of their own actions shows just how much of a blight they are on society.


  • Closed Accounts Posts: 39,022 ✭✭✭✭Permabear


    This post has been deleted.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Hayte wrote: »
    Ratings agencies have precisely zero credibility. The incentive to provide ratings during the housing bubble was dominated by market share, not the desire to produce accurate ratings. If they did produce accurate ratings, there is no way in hell you could have 90% of your triple A rated loans turn to junk in 3 years.

    If you watch the US Senate subcommittee hearings into the global financial crisis you will see that there is a massive breakdown in communication between the technical experts panel (the people responsible for the mathematical modeling of the ratings system) and the ratings agency management panel (the people responsible for allocating personnel, resource and driving market share).

    I'll try to find a direct link to the videos in question because it is worth watching. The technical experts panel was quite open about the perverse incentives, the repeated failure to update mathematical models with new data that would reflect negatively on client ratings, the high ratings applied to stated income loans at New Century Mortgages. etc. The list goes on.

    Then you watch the management panel and the language is completely different. It is evasive. Counsel for one of the management representatives had to intervene before she incriminated herself, which was truly astonishing.

    The role ratings agencies played in the financial crisis is of paramount importance. They were the organisations responsible for calculating investment risk and relaying them to investors in a way they could understand. The only reason why structured financial products like the Anderson CDO had any investors at all is because the residential mortgage backed securities in it were considered to be safe investments by multiple credit rating agencies. This is despite 45% of the Anderson loans coming from New Century Mortgages - a notorious sub prime lender that issued an incredible amount of stated income loans during the bubble and due to poor lending practices eventually blew up in 2007.

    Theres no way you can watch those subcommittee hearings, see the employers and employees of these organisations talking about their job is and what they do every day and suggest that they were only messengers.

    Edit: Video starts here:

    http://www.c-spanvideo.org/program/CreditRat

    Also watch panels 2 and 3. Yes its like 10+ hours long. Yes, its better and more important than anything you will watch on TV when you get home.


    Sure it was all "grouthink" :rolleyes:


  • Closed Accounts Posts: 13,030 ✭✭✭✭Chuck Stone


    Permabear wrote: »
    This post had been deleted.

    Again I'll happily be corrected if I'm wrong but I believe libertarians would argue on two fronts about how banking failed so catastrophically (or at least arrived where it did).

    1. That it is only through Govts that banks become massive behemoth institutions. Governments grant corporate status to banks and the limited nature (PLC) of corporations allows the people who run such corporations to distance themselves financially from failures which leads to risky money hoovering short-termism (is that a word?).

    2. It is govts through enforcement of the state (the legal system and threat of prison) that allow monopolies of money to form which leads to gargantuan institutions like the Fed in the US (perhaps the most powerful institution on the planet) and the ECB in Europe.

    In a truly libertarian free market there would be no monopolies of money; currencies would compete even at a regional level. This competing and the lack of protected corporate status would, supposedly, create a free market of money supply and carefull banking practices - the minute people suspected that money was being printed to 'save' economies people would off-load it and whichever bank printed that money would be ruined.

    Here's what happens if you try to set up a rival currency in the US.

    http://en.wikipedia.org/wiki/Liberty_Dollar


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    Permabear wrote: »
    This post had been deleted.

    Why should I have to ? Why should private banks and a corrupt government cause me to move ?

    I have no objection to paying taxes for public services; I have a massive objection to paying taxes to pass on to people who CHOSE to invest in dodgy banks like Anglo.

    Their bad judgement, their loss.

    Why can't I demand a better society in this country ?
    Permabear wrote: »
    This post had been deleted.

    No, the government certainly added to it and played its part of it, but if the banks hadn't been reckless and negligent and pursued unsustainable profits at all costs, and then hadn't gone begging, we wouldn't be where we are.

    Yes, the government should have said "go f**k yourselves" and we'll never know why they acted like they did.

    But the banks were the ones who were negligent (and in the case of Anglo, that's an understatement given some of the transactions - for which no-one has been jailed or held accountable).

    The same bankrupt banks that you support paying out massive bonuses to their head guys, even though those banks should be closed.
    Permabear wrote: »
    This post had been deleted.

    No - you left out the "u".
    Permabear wrote: »
    This post had been deleted.

    If Ahern wanted me to act unethically I wouldn't do so. The markets and banks made their own choices.
    Permabear wrote: »
    This post had been deleted.

    Quite possibly at this stage. They can't be trusted, and yet we give them our money.

    This was highlighted recently with an interaction of mine with Irish Life.....they told me I couldn't take out my money, and that all I could do was stall the payment and if I didn't want to keep paying in they would continue to take out the monthly premium from the balance until the cash was gone.

    What they refused to say was that I could simply close the account and get my money.

    As soon as I was advised of that, I did precisely that and will never deal with
    Irish Life again.

    This is the level of dishonesty that we are dealing with in the big private sector that you love so much, so I would much rather trust my money (what little I have after the ridiculous cost of living and taxes in this country) to an alternative arrangement if one were available.


  • Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    ei.sdraob wrote: »
    Did I say anywhere that the ratings agencies would be free from conflict of interest? From the start I have pointed out that blaming the rating agencies is aking to shooting the messenger and deflects from shortcomings of the politicians in handling this crisis, better described here.

    I don't think it distracts from it at all.
    ei.sdraob wrote: »
    Unlike the state controlled regulators/banks its in their own financial interest to produce accurate reports, on the other hand our very own centralbank/regulator/whateverTheyAreCalledNow were telling us for years that all is rosy with the Irish banks, did anyone even loose a job there over the incompetence that has taken place.

    Have the ratings agencies shut up shop because they were grossly wrong about both nations and banks (rating Anglo as well inside investment status, for example)? No, they haven't - so where then is the accountability of ratings agencies?
    ei.sdraob wrote: »
    Rating agencies are no saints, but right now they have more credibility than euro politicians.

    Not really (see Hayte's post) - they do a particular job - advising on the likelihood of getting your money back out of an investment - and they appear to be incompetent at it.

    How do the two even compare? European politicians are, however ham-fistedly and arguably misguidedly, at least trying to improve the situation. Nothing of the kind can be said for the ratings agencies. It's like saying that the soft drinks industry has more credibility than politicians.
    ei.sdraob wrote: »
    You continue to misrepresent what I am trying to get across, at no point did I either say there is no need for regulations either.

    I'm not even sure where I'm supposed to have said you said there was no need for regulations. If you're not getting your point across here, it may be because you are yourself arguing against things that aren't being said.

    cordially,
    Scofflaw


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  • Registered Users, Registered Users 2 Posts: 485 ✭✭Hayte


    ei.sdraob wrote: »
    Sure it was all "grouthink" :rolleyes:

    What is this supposed to mean?


  • Closed Accounts Posts: 39,022 ✭✭✭✭Permabear


    This post has been deleted.


  • Closed Accounts Posts: 6,565 ✭✭✭southsiderosie


    Liam Byrne wrote: »
    And remind me again why the government felt the misguided need to intervene ? The fact that the market refused to behave. A market that libertarians would have us trust.

    OK, I'm confused by this part.

    The government decided to have a weak regulatory structure in place for the last 10+ years. But then they decided to be interventionist when crisis struck. Arguably things might have been better had they stuck to one or the other:

    Option A: high levels of regulation/intervention (a la Canada) which would have prevented things from getting out of control but probably cooled growth somewhat or

    Option B: low levels of regulation/intervention which would have more volatility but also would have prevented the government from stepping in with the bank guarantee - the 'creative destruction' model, so to speak.

    Like everything else in Irish political economy, the problem stems from the fact that the government cannot decide if it wants to be an Atlantic-style low tax/low regulation/low benefits system or a Northern European style high tax/high regulation/high benefits system. For more than a decade, the government has had Atlantic tax policies and Northern European spending policies - with the added twist of parish pump/two degrees of separation politics. Clearly this was not going to end well.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Hayte wrote: »
    What is this supposed to mean?

    Sarcastic I was.

    That was the excuse given for the total lack of accountability and competency that was displayed by our government and our regulator

    the same regulator who "rated" our banks as "healthy and well capitalised", allowed them to grow exponentially on back of property loans,
    and then performed several stress tests (a form of rating if you will) that said the banks are all good only to be proven to be wrong time and again

    So like I said, it was all the fault of "groupthink",a pathetic excuse that it is.


  • Registered Users, Registered Users 2 Posts: 485 ✭✭Hayte


    The financial regulator is supposed to do this and I agree with you, they failed at it just like the SEC fails hard at regulating the US financial sector. Both offices have been defanged through years of financial deregulation and perverse incentive. Other than that I am still confused about what you are trying to say and why it necessitated a rolleyes.

    For credit ratings agencies to be effective they need to be commissioned by investors seeking to invest in financial products, not organisations that are creating and structuring financial products. Many of the big investment firms do both but the organisation that structures financial products should have no link to the organisation that assesses its investment risk. This way there is an incentive for the credit rating agency to provide accurate ratings because they are generating fee income from protecting investors against unknown risk.


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  • Registered Users, Registered Users 2 Posts: 34,212 ✭✭✭✭listermint


    ei.sdraob wrote: »

    Rating agencies are no saints, but right now they have more credibility than euro politicians.
    .

    You can't really be serious, really ? i mean really......... ... :eek:


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    The rolleyes was used to show sarcasm :)
    I still cant get over how all of the mistakes made by our regulator and past government were dismissed so readily as "groupthink", maybe the same could be applied to the rating agencies in the run up to the subprime crisis



    Wait until the EU comes up with its own rating agency which is the poked into giving AAA left right and center, that's when things will get real fun
    We already have euro stress tests which have proclaimed bankrupt banks as "fine and dandy" its a small step from there, Barroso was hinting at one already.


    listermint wrote: »
    You can't really be serious, really ? i mean really......... ... :eek:

    Yes really, if you read Moodys assessment posted earlier you would see its quite realistic and balanced, some euro politicians on the other hand do not want to admit there is even a problem to begin with. In their fantasy world where failure/default/bankruptcies dont exist, there is no crisis because a crisis can not exist in their perfect system...


  • Registered Users, Registered Users 2 Posts: 34,212 ✭✭✭✭listermint


    ei.sdraob wrote: »
    The rolleyes was used to show sarcasm :)
    I still cant get over how all of the mistakes made by our regulator and past government were dismissed so readily as "groupthink", maybe the same could be applied to the rating agencies in the run up to the subprime crisis



    Wait until the EU comes up with its own rating agency which is the poked into giving AAA left right and center, that's when things will get real fun
    We already have euro stress tests which have proclaimed bankrupt banks as "fine and dandy" its a small step from there, Barroso was hinting at one already.

    I wouldnt trust a rating from a vested interest group such as these agencies as much as id trust a rating from a nationalised politician.

    Make your own researched assumptions.


    The likes of Moodys et al are nothing more than a blunt instrument to puppet the markets.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    listermint wrote: »
    I wouldnt trust a rating from a vested interest group such as these agencies as much as id trust a rating from a nationalised politician.

    Make your own researched assumptions.


    The likes of Moodys et al are nothing more than a blunt instrument to puppet the markets.

    Well at least you are not calling it a conspiracy, a step in right direction

    As I said earlier if Moodys gave out bad advice & ratings all the time they would not be in business for long, hey look whats this here :cool: For a company that apparently gives out incorrect information how did they manage to make $407 Million last year? what sort of "fools" handed over so much money for their opinion??

    On the other hand there is no mechanism to give a slap on the wrist or even fire, incompetent staff at our regulator who thought that the likes of Anglo had bars of gold in their offices and were a reputable business in for a "soft landing".


  • Registered Users, Registered Users 2 Posts: 34,212 ✭✭✭✭listermint


    ei.sdraob wrote: »

    As I said earlier if Moodys gave out bad advice & ratings all the time they would not be in business for long, hey look whats this here :cool:

    F5 F5 F5:)


  • Registered Users, Registered Users 2 Posts: 37,315 ✭✭✭✭the_syco


    Full article if anyone wants to read it:
    A leading credit-ratings agency demoted Ireland's bonds to junk status Tuesday, signaling that plans to get private-sector investors to share in the burden of Greece's debt problems could have ramifications for other indebted euro-zone economies.

    Moody's Investors Service announced toward the end of U.S. trading that it was cutting Ireland's debt rating by one notch to Ba1, from Baa3, its lowest investment-grade level. It is the first of the major ratings services to downgrade the country's debt to junk levels.
    Table: European Sovereign Credit Ratings
    OB-OH868_EuroDe_D_20110614065402.jpg


    In European trading ahead of the announcement Tuesday, euro and financial markets had appeared to show signs of relief after Italian lawmakers fast-tracked efforts to pass a €40 billion ($56 billion) austerity plan in an effort to prevent Europe's debt crisis from infecting the Continent's third-largest economy.

    Euro-zone governments also accelerated their discussions Tuesday on efforts to resolve Greece's debt problems, including exploring ways to cut its €350 billion debt burden.

    Euro-zone leaders are likely to hold a special summit Friday to discuss ways to help Greece, a European Union diplomat said. Under discussion is a proposal from the Institute of International Finance, a Washington-based organization grouping more than 400 financial institutions world-wide.

    The IIF proposal—which includes ideas for buying back Greece's debt at a discount and exchanges of bonds to reduce Greece's debt-servicing burden—is now the road map for advancing talks, an official participating in the euro-zone meetings said.

    Debt buybacks and bond exchanges would aim to retire market bonds at around their current trading value, sometimes more than 60% off face value, and use the discount to help reduce Greece's debt burden.

    P1-BB554_EUROCR_D_20110711192403.jpg

    Charles Dallara, managing director of the IIF, welcomed a statement from euro-zone finance ministers following a Monday night meeting, saying it was "an important signal" suggesting governments were converging on "more fundamental approaches" for handling Greece's debt.

    Mr. Dallara, who met Tuesday morning in Brussels with officials including Olli Rehn, the European Union economic and monetary affairs commissioner, said by telephone afterward that ministers appeared to be moving toward a "lasting solution" for Greece. He said if these moves should lead to a temporary "selective default" assessment by rating agencies, it wouldn't be dire. "There is a world of difference between a temporary selective default that is part of an orderly process, and a disorderly default. Markets wouldn't be disrupted by a selective default if it were in the framework of a lasting solution for Greece," he said.

    But Moody's announcement later Tuesday demonstrated worries that such reasoning could be applied beyond Greece.

    P1-BB555A_EUCRI_D_20110711181226.jpg


    WO-AG235_EUROCR_D_20110711182811.jpg
    Reuters


    Greece's Finance Minister Evangelos Venizelos, right, talks with his Italian counterpart Giulio Tremonti at a meeting in Brussels on Monday.

    [url="http://online.wsj.com/video/news-hub-stocks-tumble-on-europe-debt-worries/A5ABAF26-C650-4E60-878F-B6CAB1BA965B.html]VIDEO[/url]

    The Dow tumbled 151 points Monday, as another round of anxiety over Europe's debt crisis spurred investors to flee risky assets like stocks. Steve Russolillo has details.


    Moody's said a key reason for its downgrade of Ireland's bond rating was the growing possibility that Ireland wouldn't return to financial markets at the end of its current bailout at the end of 2013—but also because calls for the private sector to share the Greek burden suggest the same thing will be asked in Ireland. Moody's downgraded Portugal last week, citing similar reasons.

    Moody's announcement near the end of a choppy U.S. trading session reversed a modest stock gain and sent investors scurrying into safer assets. The euro fell and the Dow Jones Industrial Average shed about 70 points in the final half-hour of trading to finish down 58.88 points, or 0.47%, at 12446.88.

    Reactions were more muted among bond-market participants. With Irish two-year bonds already yielding well above 16%, a substantial amount of risk had already been priced in. "Do you really think that if you have two-years yielding 16% that you're investment grade?" said Andrew Brenner, head of emerging markets at Guggenheim Securities.

    Even so, safe-haven Treasurys ticked higher after the Moody's move, pushing the yield down to 2.908%, its lowest level in three weeks. Yields fall when prices rise. Earlier in the session, gold prices climbed for a sixth straight session to finish at an all-time high of $1561.90 per troy ounce.

    WO-AG254_EUROCR_D_20110712202342.jpg
    Reuters

    Berlusconi, in glasses, called for 'short-term sacrifices' from Italians.




    In Italy, Prime Minister Silvio Berlusconi called for Italians to make "short-term sacrifices for longer-term gains" in rallying behind the austerity measures, including a public-sector wage freeze, that his conservative governing coalition unveiled two weeks ago. The coalition hoped that announcing the plan would be enough to fend off market concerns over Italy's solvency.

    But on Friday and Monday, investors fled the country's bonds in part because of fears that Mr. Berlusconi might not have the political support needed to quickly get the plan through both houses of Parliament.

    Senate leader Renato Schifani, a member of Mr. Berlusconi's People of Freedom Party, told reporters during a news conference that he expected the measures to pass the Parliament's upper house by Thursday, paving the way for a possible vote in the Chamber of Deputies, lower house, by Sunday.

    In an assessment of Italy's economy released late Tuesday, International Monetary Fund called for a "decisive implementation" of the nation's latest fiscal package. The IMF also said "a number of" its executive board members "felt that more frontloaded spending measures would have a positive effect on market sentiments."
    More
    Irish Government Derides Moody's
    Heard: The Euro's Sinking Fortunes


    In the Senate, Mr. Berlusconi's conservative coalition comfortably has enough votes to pass legislation. In the Chamber, however, the premier has only a thin majority, meaning that all of his coalition members need to close ranks for a sure passage of the austerity bill.

    "The crisis is pushing us to accelerate this process according to an extremely fast timetable," Mr. Berlusconi said in a statement Tuesday. "We need to eliminate any doubts over the efficiency and credibility of the measures, but we also need to remove obstacles that are holding back the growth of our economy."

    Mr. Berlusconi's comments came as the Italian government's borrowing costs jumped to 3.7% for one-year Treasury bills at Tuesday's auction, from 2.2% only a month ago.

    The government's austerity measures are aimed at balancing Italy's budget by 2014. Most of the cost savings are expected to kick in after 2012, however, in what the government says is an effort not to stall economic recovery in a country that already has one of the euro zone's lowest growth rates.

    Italy has been thrust suddenly into the European debt crisis in part because of bubbling tensions over the past few months within the governing coalition.

    A recent public spat between Mr. Berlusconi and Economy Minister Giulio Tremonti has raised questions among some investors about whether Mr. Berlusconi is committed to seeing the austerity measures through.

    Some analysts had also voiced concerned about Mr. Berlusconi's commitment to passing the austerity package because of a recent government attempt to insert—into the deficit-cutting bill—a measure that would have helped his family's holding company, Fininvest, avoid paying damages as part of a long-running legal dispute with a competitor. The government had inserted the measure into the austerity bill two weeks ago but quickly withdrew it after a large public outcry.

    Last weekend, a court ruled that Fininvest needed to pay €560 million to rival CIR as part of the dispute. In a research note Tuesday, Credit Suisse said one of the reasons investors have targeted Italy over the past few days was in part due to the efforts to help Fininvest avoid paying the fine.

    "The issue of Fininvest trying to limit paying its fine limits credibility of the government," Credit Suisse said in the note. Later in the day, Fininvest's top lawyer made assurances that Fininvest would pay the fine in accordance with the court order. The lawyer said the company would, however, appeal the court ruling to Italy's highest court.

    Meeting Tuesday, EU finance ministers committed to backstop banks that fail stress tests, the results of which will be announced Friday. Officials said all vulnerable banks must recapitalize themselves, be recapitalized by their governments or restructure.
    —Jonathan Cheng, Matt Phillips, Giada Zampano and Costas Paris contributed to this article.


  • Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    ei.sdraob wrote: »
    Well at least you are not calling it a conspiracy, a step in right direction

    As I said earlier if Moodys gave out bad advice & ratings all the time they would not be in business for long, hey look whats this here :cool: For a company that apparently gives out incorrect information how did they manage to make $407 Million last year? what sort of "fools" handed over so much money for their opinion??

    On the other hand there is no mechanism to give a slap on the wrist or even fire, incompetent staff at our regulator who thought that the likes of Anglo had bars of gold in their offices and were a reputable business in for a "soft landing".

    So...the ratings agencies...who we know were spectacularly wrong about Irish banks, Greece, Ireland, etc etc...still make vast sums of money.

    Are you claiming that that shows that they were, in fact, right about what we know them to have been wrong about, because otherwise they'd have gone out of business?

    Because, you know, they were wrong, and as you've just pointed out, they haven't gone out of business - far from it. By your reckoning, therefore, they must have been right about Anglo being a good investment, because otherwise, you know, the markets would have punished them and put them out of business for getting it so wrong.

    cordially,
    Scofflaw


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Scofflaw wrote: »
    So...the ratings agencies...who we know were spectacularly wrong about Irish banks, Greece, Ireland, etc etc...still make vast sums of money.

    Are you claiming that that shows that they were, in fact, right about what we know them to have been wrong about, because otherwise they'd have gone out of business?

    Because, you know, they were wrong, and as you've just pointed out, they haven't gone out of business - far from it. By your reckoning, therefore, they must have been right about Anglo being a good investment, because otherwise, you know, the markets would have punished them and put them out of business for getting it so wrong.

    cordially,
    Scofflaw

    Their share price plunged from 73 to 16 from 2007 to 2009, thats their shareholders voting with their wallets and nearly driving the company under.
    Obviously enough they got something right to have rebounded since and are making profits.


    On the other hand there is no mechanism to punish incompetency in state run agencies, if anything they get a nice bonus and cushy pension. And their mistakes are all excused as "groupthink" (sic)


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    ei.sdraob wrote: »

    On the other hand there is no mechanism to punish incompetency in state run agencies, if anything they get a nice bonus and cushy pension. And their mistakes are all excused as "groupthink" (sic)

    State run agencies singled out? And yet you seem OK with bankers receiving bonuses?


  • Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    ei.sdraob wrote: »
    Their share price plunged from 73 to 16 from 2007 to 2009, thats their shareholders voting with their wallets and nearly driving the company under.

    A fall in share prices doesn't "drive a company under", unless the company has a huge need of capital it has to raise through share issues. Otherwise, once the company has sold the shares, their further price is largely irrelevant to the company's finances.

    The question would be whether they lost customers, not share price.
    ei.sdraob wrote: »
    Obviously enough they got something right to have rebounded since and are making profits.

    No, no - that doesn't follow even slightly. You're making a massive assumption there, which is that whether the ratings agencies do well is dependent on whether they do things right. And you can't make that assumption, because it's what you're supposed to be proving, and what other people are arguing isn't the case. You are "begging the question" - assuming what you want to prove.
    ei.sdraob wrote: »
    On the other hand there is no mechanism to punish incompetency in state run agencies, if anything they get a nice bonus and cushy pension. And their mistakes are all excused as "groupthink" (sic)

    "Groupthink" doesn't excuse mistakes - it is a contributory factor in them. It says that there is a cultural, organisational problem, rather than just a couple of bad decision-makers. It says that the solutions must involve root and branch reform of the organisation, not merely the show trials of a couple of individuals.

    Sometimes you have a really firm grasp of the wrong end of the stick.

    regards,
    Scofflaw


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  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Liam Byrne wrote: »
    State run agencies singled out? And yet you seem OK with bankers receiving bonuses?

    Where have you got the idea that i am ok with bankers getting bonuses? (i am assuming you are talking about the lot who ran the irish banks into the ground)


    Scofflaw wrote: »
    "Groupthink" doesn't excuse mistakes - it is a contributory factor in them. It says that there is a cultural, organisational problem, rather than just a couple of bad decision-makers. It says that the solutions must involve root and branch reform of the organisation, not merely the show trials of a couple of individuals.

    Sometimes you have a really firm grasp of the wrong end of the stick.

    regards,
    Scofflaw

    Yeh "groupthink" is the only excuse that was made for the goings on that occurred in a recent report we argued about here, where is this reform anyways?


  • Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    ei.sdraob wrote: »
    Yeh "groupthink" is the only excuse that was made for the goings on that occurred in a recent report we argued about here, where is this reform anyways?

    No, 'groupthink' was given as the reason there was no particular point in singling out individuals. Like I said, it's an observation that the whole organisation is screwed up, and that you won't solve the problem by getting rid of a few people, because their successors will probably make exactly the same kind of mistakes.

    Classically, the response to an accusation against an organisation - such as "the Gardai are racist" - is to pin the blame firmly on some sacrificial individuals ("bad apples"), whether they were really responsible or not, kick them out with their benefits and pensions intact ("contractual obligations", you know?), and claim to have solved the problem. "Groupthink" means that there's a cultural issue that cannot be solved in that way. I'm not sure why you're arguing in favour of the approach also favoured by the organisations found to have screwed up badly - but then, I'm not sure what you're arguing at all, or even whether you are arguing anything in particular other than that I'm wrong and so there.

    And yes, the ratings agencies will have suffered from 'groupthink', both within the organisations and as part of the wider markets. Everyone thought that Anglo had discovered a "new paradigm" for investment banking, so that was what the ratings agencies thought - and within the ratings agencies people will have done their best to think what everyone else in the agency thought, too, because that way lay bonuses and job security. They had exactly the same problems as the semi-states and government departments - unwillingness to rock the boat, willingness to buy into what everyone else apparently thought - but for some reason you're happy to give the ratings agencies a free pass, even though their screw-up was clearly of a similar scale and form, and with similar roots. And the ratings agencies have no more gone out of business than the DoF, and the decision-makers within them probably haven't even suffered the same salary cutbacks as the DoF, because the ratings agencies don't even have to live with their mistakes.

    regards,
    Scofflaw


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    ei.sdraob wrote: »
    Where have you got the idea that i am ok with bankers getting bonuses? (i am assuming you are talking about the lot who ran the irish banks into the ground)

    Well those are the result of your libertarian mindset......they got their organisations massive short-term profits and got commissions and bonuses and swanned off into the sunset with their contractual obligation pensions.

    Completely unsustainable and sickening, but an example of what unscrupulous and unregulated organisations will do if given free reign.

    Not only that, but you have defended the payment of bonuses to CURRENT staff even though under the libertarian view those people wouldn't even be getting a salary.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Liam Byrne wrote: »
    Well those are the result of your libertarian mindset......they got their organisations massive short-term profits and got commissions and bonuses and swanned off into the sunset with their contractual obligation pensions.

    Completely unsustainable and sickening, but an example of what unscrupulous and unregulated organisations will do if given free reign.

    Not only that, but you have defended the payment of bonuses to CURRENT staff even though under the libertarian view those people wouldn't even be getting a salary.

    Under Austrian school of thought failure is not rewarded nor bailed out unlike the current regime setup by politicians.


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    ei.sdraob wrote: »
    Under Austrian school of thought failure is not rewarded nor bailed out unlike the current regime setup by politicians.

    The private organisations in question still behaved irresponsibly for years well before the politicians stepped in.


  • Closed Accounts Posts: 18,163 ✭✭✭✭Liam Byrne


    Permabear wrote: »
    This post had been deleted.

    Doesn't mean I want to or appreciate being forced to leave in order to try and find an ethical country where incompetence and corruption and profiteering aren't rewarded.
    Permabear wrote: »
    This post had been deleted.

    Well then we may as well quit the discussion now. At least we get SOMETHING in return for unionised public servants....they may not be value for money, but at least they're not completely the equivalent of shovelling it onto a bonfire while former corrupt CEO's skive off to America to hide behind their bankruptcy laws to hide their assets.
    Permabear wrote: »
    This post had been deleted.

    Because I wasn't reckless or negligent. Those rates were available to me. I turned down a loan that was offered that would have given me something I really wanted because common sense told me it was a step too far. So it is possible. Not common enough, but possible.

    And I'll say it again - 50% of the negligence was on the part of the privately-owned banks.

    Strange how you say "people act recklessly" and yet, despite banks being operated by people, you don't want those reckless actions to be regulated.


  • Registered Users, Registered Users 2 Posts: 485 ✭✭Hayte


    ei.sdraob wrote: »
    Under Austrian school of thought failure is not rewarded nor bailed out unlike the current regime setup by politicians.

    I'm sorry, the Austrian School can essentially be boiled down to "because human interactions are complex, quantative mathematical analysis cannot be applied to economics". It hasn't had any major proponents in the past century that weren't crazy and it should be laughed at when applied to social policy.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    Hayte wrote: »
    I'm sorry, the Austrian School can essentially be boiled down to "because human interactions are complex, mathematical analysis is not applicable to economics". It hasn't had any major proponents in the past century that weren't crazy and it should be laughed at when applied to social policy.

    Crazy enough to win Nobel prize?


  • Registered Users, Registered Users 2 Posts: 17,595 ✭✭✭✭nacho libre


    Liam Byrne wrote: »
    The private organisations in question still behaved irresponsibly for years well before the politicians stepped in.

    Alan Greenspan has a lot to answer for in that regard. I have noticed that it is convenient for right wing libertarians to blame all our current financial problems solely on crony capitalism. It's easier to do that i suppose than acknowledge the failings in their cherished system


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