So we dont have to pay back German Bondholders

Good loser

hatrickpatrick wrote: »

LOL!
You just perfectly summed up the entire cohort of bondholders, senior or otherwise, who chose of their own free will to invest in a cowboy bank.
Oh the irony...

Isn't it better all round if everybody paid their own debts? The bondholders, I'm sure, have their own debts to pay.

hatrickpatrick

Good loser wrote: »

Isn't it better all round if everybody paid their own debts? The bondholders, I'm sure, have their own debts to pay.

It's not my problem if they can't pay it because they chose to invest badly.
If I go into a bookies and bet on the wrong horse, do I have the right to walk out onto Grafton Street and demand that every passer by I meet chips in to pay me back for the bet I placed?

This is literally what we're being hit with in the case of the taxpayer being forced to repay private debt. Their money, their investment, their loss. Not ours.

Scofflaw

hatrickpatrick wrote: »

It's not my problem if they can't pay it because they chose to invest badly.
If I go into a bookies and bet on the wrong horse, do I have the right to walk out onto Grafton Street and demand that every passer by I meet chips in to pay me back for the bet I placed?

This is literally what we're being hit with in the case of the taxpayer being forced to repay private debt. Their money, their investment, their loss. Not ours.

It's not "literally" like that. First, they didn't make a bet, they loaned money, with a variety of legal safeguards to ensure they got it back. Your view works as an analogy, perhaps, if you include that fact, as well as the fact that the race result itself may well have been bent by poor regulation, which meant that while you thought you were betting on a horse what was actually running was a donkey - and that you're in a position to take a legal case against the bookies in order to recover your money, which you're not in actual betting situations. Because they weren't betting, they were lending, and the two situations are only equivalent in that they involve the element of chance that absolutely everything in the world does.

cordially,
Scofflaw

later12

hatrickpatrick wrote: »

It's not my problem if they can't pay it because they chose to invest badly.
If I go into a bookies and bet on the wrong horse, do I have the right to walk out onto Grafton Street and demand that every passer by I meet chips in to pay me back for the bet I placed?

This is literally what we're being hit with in the case of the taxpayer being forced to repay private debt. Their money, their investment, their loss. Not ours.

Eh, to follow that analogy through to completion, we're the owner of one racing stallion.

We only have one stallion, and (for whatever reason) we cannot replace that animal.

We depend on this horse and his future crops for our income from Sheikhs and tycoons and all sorts of international investors.

And yes, when time are tough, we can choose to let the horse break down, go lame, get injured, and lose all of his races.

But we must bear in mind that if we do so, we risk damaging the reputation of his bloodline, and the quality of investment that he attracts from the market.

Letting the punters at the racecourse lose their money is only a very momentary outcome which barely affects us, but the reputational costs of doing so in the industry itself is what can potentially bring about serious and lasting reputational damage for our asset.

I dislike using gambling metaphors to toss about ideas on sovereign bond markets, because the latter is such a singular and peerless beast. But if you are going to employ such metaphors, at least take them to completion.

View

hatrickpatrick wrote: »

It's not my problem if they can't pay it because they chose to invest badly.

Bond holders loan money (not invest) based on published information by companies.

It is up to regulators to ensure that information is (reasonably) accurate. In the case of banks that wasn't the case - notably Anglo whose information was possibly even fraudulent - yet our regulator failed to do so (Anglo was rated AA - a good, not bad, rating - based on the accounts it published if I remember correctly).

Rightly, or wrongly, we exercised our sovereignty and stepped into that messy picture and now several years later, the banks' former debt is our state's debt. Your complaint really is crying over spilt milk at this stage.

later12

View wrote: »

Bond holders loan money (not invest) based on published information by companies.

This is a sort of pointless exercise that usually relies on some emotional guilt tripping for honouring our obligations. In fact, a sovereign bond indenture is both a loan and an investment - just as a mortgage might be perceived, or a corporate bond issue.


There are strong reasons for not defaulting when a sovereign is legitimately solvent, but this line of argument that a bond is a "loan" and oh! therefore untouchable, is not really an observation to be taken seriously. It doesn't matter what you call it.

There are times for defaulting on sovereign debt when the debt is clearly unsustainable; and if the need arises then it should be done as quickly and comprehensively and as amicably as possible. What we should be arguing is that the Irish stock is sustainable or can be made to be sustainable, not squabbling over whether our obligations are loans or investments, and swinging at one another with the emotional baggage that applies to both terms respectively.

foxcoverteddy

Reading the post's is disheartening, we have politicians who are useless running the country, but what they are good at is protecting other professionals, we have no option than do what they say and pay what they demand.
We are no better we are not standing up to them, take Phil hogan could niot organise the household charge or the septic tanks, annual rating will be another scam.
Many of you are very articulate writers, it is wasted to a degree on the boards, who listens, only other boarders.
Now we have clown Reilly, do we need him? If not let us get rid of the Doctor.
Come on time for a radical change.

Scofflaw

later12 wrote: »

This is a sort of pointless exercise that usually relies on some emotional guilt tripping for honouring our obligations. In fact, a sovereign bond indenture is both a loan and an investment - just as a mortgage might be perceived, or a corporate bond issue.

There are strong reasons for not defaulting when a sovereign is legitimately solvent, but this line of argument that a bond is a "loan" and oh! therefore untouchable, is not really an observation to be taken seriously. It doesn't matter what you call it.

There are times for defaulting on sovereign debt when the debt is clearly unsustainable; and if the need arises then it should be done as quickly and comprehensively and as amicably as possible. What we should be arguing is that the Irish stock is sustainable or can be made to be sustainable, not squabbling over whether our obligations are loans or investments, and swinging at one another with the emotional baggage that applies to both terms respectively.

On the other hand, the use of gambling analogies is clearly intended as a way of fending off the idea that there is any obligation for repayment, and tends to go hand in hand with the belief that Irish debt is unsustainable.

Similarly, more careful distinction of the legal status tends to go hand in hand with the belief that Irish debt is probably sustainable, but doesn't necessarily imply that someone believes debt is untouchable - as far as I can see, you've brought that idea in yourself, and I'm not sure other people necessarily subscribe to it. I know I don't.

cordially,
Scofflaw

later12

Scofflaw wrote: »

On the other hand, the use of gambling analogies is clearly intended as a way of fending off the idea that there is any obligation for repayment, and tends to go hand in hand with the belief that Irish debt is unsustainable.

Yes, I agree.

Similarly, more careful distinction of the legal status tends to go hand in hand with the belief that Irish debt is probably sustainable, but doesn't necessarily imply that someone believes debt is untouchable

Not sure what you mean 'a more careful distinction of the legal status' there. Insisting that a bond indenture is a loan and not an investment is not a careful legal distinction, it is factually incorrect.

I realize that nobody has actually claimed that sovereign bonds are untouchable in this thread, I was talking moreso about the implication; perhaps that wasn't clear. I just see the effort to describe such paper as a loan and not an investment instead of a loan and an investment as a pointless & emotional guilt tripping exercise.
In that context, I'd thought my paraphrasing would have been obvious, it certainly wasn't intended as a direct quote though I appreciate may be perceived as a strawman.

Scofflaw

later12 wrote: »

Yes, I agree.

Not sure what you mean 'a more careful distinction of the legal status' there. Insisting that a bond indenture is a loan and not an investment is not a careful legal distinction, it is factually incorrect.

I realize that nobody has actually claimed that sovereign bonds are untouchable in this thread, I was talking moreso about the implication; perhaps that wasn't clear. I just see the effort to describe such paper as a loan and not an investment instead of a loan and an investment as a pointless & emotional guilt tripping exercise.
In that context, I'd thought my paraphrasing would have been obvious, it certainly wasn't intended as a direct quote though I appreciate may be perceived as a strawman.

But there is a distinction, surely? One might buy a bond as an investment, but a bond itself is a loan, and the main distinction between the two is that a loan does carry the expectation of full repayment. Indeed, a bond is a contract, with the interest rate, dates of interest payments, and date of repayment all stipulated.

An "investment" on the other hand, would normally carry the connotation of money put directly into a concern with the hope of increase, but with the inevitable understanding of possible decrease.

If I said to you that I had "invested in company x", it's usually clear that I don't have a fixed repayment contract with them - instead, I have some assigned method by which I both measure and receive my return. If, on the other hand, I said that I had "loaned money to company x", there's a very different expectation.

I don't think the trading of bonds as investments changes that.

cordially,
Scofflaw

later12

You're applying your own narrow interpretation of the meaning of the word investment to arrive at a situation where you satisfy your original proposition. A reasonable person simply must accept that there is a broader and a more general understanding of the term investment to mean the placing of (usually) money into a venture, asset, strategy or share with the general aim of preserving one's wealth or collecting a profit.

You seem to be limiting your understanding of the term investment to mean something that can be readily bought & sold and which carries some arbitary, undefined level of risk - I take it you don't then view Special Savings Investment Accounts as investments

And to get back to the original point - what exactly is the relevance of your proposition that bond indentures are a loan as opposed to objects that may be percedived as a loan and investment?

To me this comes across as an appeal to emotion - you don't want to be the sort of rascal who doesn't pay his debts, do you?

Scofflaw

later12 wrote: »

You're applying your own narrow interpretation of the meaning of the word investment to arrive at a situation where you satisfy your original proposition. A reasonable person simply must accept that there is a broader and a more general understanding of the term investment to mean the placing of (usually) money into a venture, asset, strategy or share with the general aim of preserving one's wealth or collecting a profit.

You seem to be limiting your understanding of the term investment to mean something that can be readily bought & sold and which carries some arbitary, undefined level of risk - I take it you don't then view Special Savings Investment Accounts as investments

Really? I would have said pretty much the opposite - I would in fact have said that you're using the general term 'investment', which covers bonds, and then applying the sort of expectations and rules covering 'investment' in the narrower sense of speculatively putting money into a company to bonds by virtue of them being covered by the same term.

After all, in that sense, the bank is undertaking an 'investment' when it lends you money - its purpose is make a return it may or may not make. But turning round to the bank and saying "well, hey, I didn't make as much as I said in the business plan, so your investment in me won't return what was originally agreed" isn't going to wash.

later12 wrote: »

And to get back to the original point - what exactly is the relevance of your proposition that bond indentures are a loan as opposed to objects that may be percedived as a loan and investment?

To me this comes across as an appeal to emotion - you don't want to be the sort of rascal who doesn't pay his debts, do you?

No, it's not about that, it's about pointing out the legitimacy of the expectations on the part of bondholders that they be able to recover their money - not for moral reasons, but because that legitimate expectation carries through to their rights and expectations in court.

Again, you can't sue me if you invested (sensu stricto) in my company and it didn't make as much of a return as you hoped - unless I've committed fraud, that is, or been negligent. But if you lend me money with agreed terms and conditions, then you certainly can sue me if I don't adhere to them. The two are quite different in court.

I don't see that pretending bonds are not loan contracts is a valuable exercise, since it confuses the picture on the outcome of a solvent bank attempting to write down the value of bonds - by making it seem as if the only recourse bondholders would have had was to suck up the loss and move on, which is not the case.

cordially,
Scofflaw

later12

Scofflaw wrote: »

Really? I would have said pretty much the opposite - I would in fact have said that you're using the general term 'investment', which covers bonds, and then applying the sort of expectations and rules covering 'investment' in the narrower sense of speculatively putting money into a company to bonds by virtue of them being covered by the same term.

Really? What 'rules' and 'expectations' specifically am I applying here? Where are you getting this?

I am merely stating a horrendously basic fact: that the original statement, to which I referred, that bond investors were not investing but lending is factually incorrect; bond investors were lending and they were also investing. Yes! Just like banks with mortgages, amazing isn't it.

Unlike you, I have no interest in using that distinction to promote either side of the argument, because that would be a pretty stupid argument that relies on some juvenile investors=baddies, lenders=goodies argument that to be frank, is not very appealing. Not least because there are far more substantial points to be made.

turning round to the bank and saying "well, hey, I didn't make as much as I said in the business plan, so your investment in me won't return what was originally agreed" isn't going to wash.

A household or a company is not a small version of a sovereign state. And of course it's going to wash. These are banks, not schoolmarms. We can all be adults and settle insofar as is possible and move on.

I don't see that pretending bonds are not loan contracts is a valuable exercise

It isn't. Neither is pretending they're not investments. That's the point.

Scofflaw

later12 wrote: »

Really? What 'rules' and 'expectations' specifically am I applying here? Where are you getting this?

I am merely stating a horrendously basic fact: that the original statement, to which I referred, that bond investors were not investing but lending is factually incorrect; bond investors were lending and they were also investing. Yes! Just like banks with mortgages, amazing isn't it.

Unlike you, I have no interest in using that distinction to promote either side of the argument, because that would be a pretty stupid argument that relies on some juvenile investors=baddies, lenders=goodies argument that to be frank, is not very appealing. Not least because there are far more substantial points to be made.
A household or a company is not a small version of a sovereign state. And of course it's going to wash. These are banks, not schoolmarms. We can all be adults and settle insofar as is possible and move on.
It isn't. Neither is pretending they're not investments. That's the point.

Shrug. I'm hardly pretending they're not investments, since I've stated that they are several times now. I'm just pointing out that they're not, by virtue of being investments, simply equivalent to any other form of investment, and it's inaccurate to make such a claim.

Nor am I trying to make a "investors=baddies, lenders=goodies" argument - quite aside from anything else, having run my own business(es), my feelings are quite the reverse! Investors stand and fall with you, lenders expect their money back - bondholders are of the latter type, not the former. It doesn't mean they can't have their 'investment' written down if it can't be repaid, but it does mean there has to be a legally watertight reason why it can't be repaid. And that's a large and meaningful difference you're papering over.

I can't help but feel, too, that despite your own protestations, your argument that "lenders=investors" is aimed at making some kind of moral point, and at somehow reducing what you perceive to be a moral bias in favour of lenders. As far as that goes, work away, but you've taken it to a point where you're blurring legal distinctions between things you evidently recognise as different - how else can one make your "investors=baddies, lenders=goodies" distinction, other than by recognising that difference?

cordially,
Scofflaw

later12

Scofflaw wrote: »

Investors stand and fall with you, lenders expect their money back - bondholders are of the latter type, not the former.

Your ascribing traits to them which I'm not sure are appropriate. Why must they be one or the other? Most investors, unless they are philanthropists, family members or dear friends, will have an implicit anticipation of getting their financial investment back. And lenders, as many Irish householders are discovering, are willing to take hits on their investments.

It doesn't mean they can't have their 'investment' written down if it can't be repaid, but it does mean there has to be a legally watertight reason why it can't be repaid.

Erm, are you talking about sovereign bond issues here? Because in the case of Irish sovereign bonds, most of which are written under Irish law, there doesn't need to be a watertight legal reason why it can't be repaid in itself. All it takes is for the Government to decide it wants to change the terms of these bonds, which barring any Constitutional impediment, it is legally entitled to do.

Now there are strong reasons why this would be an absurd and economically suicidal route to take, but no; the law is not really a hindrance in that respect, though there may be repercussions from an EU perspective. And a Government's ability to change the terms of domestically written debt issues sets it quite apart from households, which is what I'd meant when I said that households are not just small versions of sovereign states.

I can't help but feel, too, that despite your own protestations, your argument that "lenders=investors" is aimed at making some kind of moral point

I can't help if you can't help but feel that. All I can say is that I made my original point in contravention to a position that View instigated, which is that they were lending and not investing. Which is quite fundamentally incorrect.

Scofflaw

later12 wrote: »

Your ascribing traits to them which I'm not sure are appropriate. Why must they be one or the other? Most investors, unless they are philanthropists, family members or dear friends, will have an implicit anticipation of getting their financial investment back. And lenders, as many Irish householders are discovering, are willing to take hits on their investments.

Again, the investors may have an "implicit anticipation", or expectation, of getting their money back, but have no legal contract that they will do so. Lenders, on the other hand (unless very stupid) have a legal contract stating they will get their money back. Lenders may in extraordinary circumstances have to write off some of the money, but investors do the same under quite ordinary circumstances.

I don't see how one can possibly gloss over that difference the way you're trying to, particularly when what is under discussion is the implications of non-repayment.

later12 wrote: »

Erm, are you talking about sovereign bond issues here? Because in the case of Irish sovereign bonds, most of which are written under Irish law, there doesn't need to be a watertight legal reason why it can't be repaid in itself. All it takes is for the Government to decide it wants to change the terms of these bonds, which barring any Constitutional impediment, it is legally entitled to do.

But you're not describing there not being a legal contract to repay there, but the ability of governments to change the law, and thereby to change what constitutes a 'watertight legal reason'.

later12 wrote: »

Now there are strong reasons why this would be an absurd and economically suicidal route to take, but no; the law is not really a hindrance in that respect, though there may be repercussions from an EU perspective. And a Government's ability to change the terms of domestically written debt issues sets it quite apart from households, which is what I'd meant when I said that households are not just small versions of sovereign states.

Unfortunately, you both brought up households, and are arguing against them. They haven't formed any part of my argument.

later12 wrote: »

I can't help if you can't help but feel that. All I can say is that I made my original point in contravention to a position that View instigated, which is that they were lending and not investing. Which is quite fundamentally incorrect.

As is your attempt to make investment and lending fundamentally identical. They are investing in loans, but that doesn't make the loan itself anything other than a loan.

cordially,
Scofflaw

later12

Scofflaw wrote: »

Again, the investors may have an "implicit anticipation", or expectation, of getting their money back, but have no legal contract that they will do so.

If you're talking about equity level investors, then no, that's quite true.
But similarly, suggesting that bond investors have a right to their money which can only be deconstructed with a legally watertight argument is misleading, since that can be changed at the whim of a Government, presuming the Government debt is not written under London or NY law.

I don't see how one can possibly gloss over that difference the way you're trying to, particularly when what is under discussion is the implications of non-repayment.

Then discuss the implications of non repayment.

I'm still trying to see the relevance of fretting over whether they are more like investors or more like lenders, when the whole thing is utterly meaningless and inconsequential. Whatever repercussions to default exist should be delineated clearly and coherently, not by resorting to silly connotations like you know , they really are more like lendersthan investors

But you're not describing there not being a legal contract to repay there, but the ability of governments to change the law, and thereby to change what constitutes a 'watertight legal reason'.

No, I was responding to your suggestion that "there has to be a legally watertight reason why it can't be repaid." There is an easier option: change the law.

As is your attempt to make investment and lending fundamentally identical. They are investing in loans, but that doesn't make the loan itself anything other than a loan.

Of course extending a loan is an investment: it's an asset which the investor, bank or financial institution buys with the aim of making a profit.

Scofflaw

Eh, the legal differences are real, and remain. That has practical implications for the arguments pro/con burning bondholders. The moral argument is pretty much irrelevant, since it exists only as a justification for seeking a self-serving course of action, and has no particular effect in itself.

Noting the real legal differences between bonds and other forms of investment doesn't form a moral argument emotionally justifying one course of action over another - it highlights the practical difficulties involved in a course. One can wave them away by pointing out that the law can be changed, but that merely moves the difficulties around, since changing the laws is not friction-free either.

Blurring the lines doesn't acknowledge those difficulties, which suggests that it's a justificatory approach rather than a practical one.

Still, at this stage, we'll probably have to agree to differ.

cordially,
Scofflaw

later12

Scofflaw wrote: »

Blurring the lines doesn't acknowledge those difficulties, which suggests that it's a justificatory approach rather than a practical one.

Only if one were to believe that (i) investors never have recourse to the law to protect their position or investment, or (ii) that bondholders are not simultaneously lenders. I haven't been proposing either.

And you may keep reading what you will into my posts, all I can tell you is what I'm saying and I have been saying in this thread; that whilst we should not be encouraging a default, that is completely irrelevant to the fact that, just as they can walk and chew gum at the same time, bondholders are simultaneously investors and lenders.

I have no problem in engaging with the (mainly economic) difficulties that surround an unstructured default. in fact I've done it on lots of occasions and pretty consistently on this very forum. Sovereign bond investors do not walk, talk or quack like other investors. That's not being contested. But the reason I got into this discussion, which was the proposed notion that they were not investing, is a step too far.

Anyway, I fear this is not a particularly entertaining read for people interested in the OP and has the air of how many Greek Prime Ministers can tango on the head of a needle about it, so I agree we should probably agree to differ.

Sand

@Scofflaw

But it really is important that we in Ireland recognise the massive Irish regulatory failures that led us to where we are, and it's not as if I'm inventing such failures - see the Honohan report and the other similar documents, which detail failures reaching to levels of absurdity and well beyond parody. What we're arguing about here only covers something like 10% of the cost of the Irish bank bailout - yes, I appreciate that McCarthy disagrees with Coffey's analysis, but McCarthy has a dog in the fight and, equally or more importantly, is far far less of a numbers guy than Coffey - but it tends to spread out in a generalised way until the ECB becomes, through "a ridiculous amount of Euroscepticism and nationalistic rallying to the cause of the poor downtrodden sovereign", responsible for the entirety of our downfall.

So, to answer later12's question, no, I don't regard the ECB threatening the Irish government as acceptable, but I regard the Irish government having got us into a position where the ECB felt it had to do such a thing as even less acceptable and by a very very very long margin.

The problem is Scofflaw that you seem to think if enough pressure and hardship is exerted on the Irish state and taxpayer that it will lead to a leaner, fitter, more efficient and effective state with clear sighted, transparent policy-making that will deliver better governance. That Official Ireland will suddenly have some sort of damascene conversion where it maturely recognises its bad governance, and fearlessly reforms itself. From that point of view, any relaxation of the quite simply *terrible* deal forced on Ireland by the ECB, over the protests of the IMF, is bad because it reduces the pressure on Official Ireland.

But its fantasy. Dismissing a 10% saving as unimportant overall only makes sense if you believe all sectors are shouldering the debt equally. They're not.

The Irish state is doing and will continue doing what it did all through the Dev years, all through the 1950s in particular and all through the 1980s. It will maintain its own position and drive all the pain and suffering onto ordinary people who will see their hospitals closed, their schools unfunded and their policing reduced and cut back and told to feck off abroad if they want a job. Meanwhile outlandish unfunded pensions will be maintained, increments will be paid as normal and vested interest groups will be paid off. No reform worthy of the name will be pursued: look at the constitutional convention. Little more than a public focus group now. The CPA is a joke, but a joke Enda Kenny is determined will run and run despite absolutely no evidence of any trade union co-operation on reform. The Irish state is not under any pressure to reform.

So just recognize that now: all the pain and suffering will achieve nothing of value in moral or practical terms. Once you recognize that, the pragmatic goal is to minimize the suffering of Irish citizens. Getting a better deal for Ireland helps Irish citizens keep access to schools, policing and health care. Maintaining the current awful deal, no matter how morally just you might think it that Ireland *should* suffer, will hinder Irish citizens access to schools, policing and health care.

Neither scenario will affect Official Ireland which will not reform or improve under the CPA, no matter how badly ordinary Irish citizens suffer and no matter who the Irish citizens vote in.

ardmacha

The CPA is a joke, but a joke Enda Kenny is determined will run and run despite absolutely no evidence of any trade union co-operation on reform.

Change the record. Every thread in this forum is derailed by half baked rants about the CPA. There is plenty of scope for criticism, but it is simply ridiculous to say that there has been no reform or trade union cooperation in a state which has reduced its expenditure on pay by 20% without significant industrial relations problems.

If official Ireland does not reform itself it will be largely because people are entirely unwilling to apply any logic to their commentary or discriminate clearly between things that are really need attention and cases where much is being done, even if everything isn't perfect.

Sand

Every thread in this forum is derailed by half baked rants about the CPA.

Nope, every thread is derailed by someone popping up with a cookie cutter barely relevant and frankly boring comment like: "Didn't take long for the CPA/Public Sector/Trade Union bashing to begin" or "Oh, another CPA/Public Sector/Trade Union bashing thread".

foxcoverteddy

Right, i have read some brilliant post's, but none of you have come up with a plan of action. The Irish citizen can no ;longer sit back and say it will be alright.
We are in 2012 the days of acceptance of Irish politicians greed and mismanagement can no longer be tolerated.
With your brilliance you must form some kind of action before it is too late.