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Ireland: A Recession Of The Banks, By The Banks, And For The Banks

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Stunning. That things are allowed to proceed in that way shows how much power banks have got. Noone can compete with the issuer of money.

http://fistfulofeuros.net/afoe/economics-country-briefings/ireland-a-recession-of-the-banks-by-the-banks-and-for-the-banks/

Ireland: A recession of the banks, by the banks, and for the banks

by P O Neill Some stories heard in rural Ireland this summer. A farmer goes into an embattled tractor dealer and reaches an understanding on the purchase of an expensive tractor. The farmer then goes to his local bank manager to get financing to purchase the tractor; as agriculture is not doing too badly despite the recession, there is some hope. But the bank has an unexpected response: we can’t give you a loan to buy that tractor, but we can finance one very like it — that we recently reposessed. So banks are in the farm machinery business, at the expense of actual farm machinery businesses.

A recreational golf player reports that it’s a good time to play golf in Ireland. Some local courses that had gotten shabby and run-down are finally having some needed working capital put into them, and now they look good. How did this happen? The banks took them over and will do anything to attract a bit of business, even if it means putting in some additional money. Then there’s the miseries of the hotel business, which have featured in the national newspapers. Apparently the hotels being run by banks have gotten hold of the forthcoming wedding parties at neighbouring hotels, and are calling the couples directly with offers of a better deal — enough of a better deal to cover the lost deposit at their original booking. And finally, one of the big fish: the well-known department store Arnott’s, now being run by Ulster Bank (RBS subsidiary) and Anglo Irish Bank (of which more in a moment).

The big picture is that the Irish debt crisis has put the banks into lines of business that they never planned to be in. With the result that significant sectors of the Irish domestic economy are now being run by them. But there is a strange flip side to this situation. There is exactly one sector of the economy that the government has declared off-limits from the process of debt distress, restructuring, and external management — the banking sector. And so it is that unlimited public funds are available to keep solvent what would otherwise be insolvent banks, the €24 billion or so directed to Anglo Irish Bank being the epitome of this problem.

And sometimes we wonder if the external prognosticators looking at Ireland have fully grasped the role of the banks in the Irish economic shambles. Why did the government’s favourite bedtime scary monster, “the markets”, react so badly to the European Commission approving the €24 billion for Anglo, a figure that has been known in general terms for months and was, within a couple of billion, confirmed by the Minister of Finance to the Dail a few months ago? Was it the first time that the headline number crossed the Reuters screen, or was it the government’s inability to say that it’s this €24 billion and not another eurocent more into a dead bank?

Anyway, another day brings another bit of dysfunction. Recognizing the scale of the restructuring that needs to be done, you’d think there would be a rush to get it done as quickly as possible and reduce some of the debt overhang. Not necessarily. Restructuring typically means new equity and all the existing stakeholders — including creditors — taking a loss. But the Central Bank of Ireland has blocked any loan writedowns for assets headed to the National Asset Management Agency (NAMA), meaning that even banks that see the value in taking a steep haircut and letting new equity come in to a troubled client can’t do it. Maybe NAMA can do it a year from now. Is it worth letting such decisions fester for another year? The government seems to think so.

A few more conversations seek to establish whether anyone in Ireland is feeling optimistic, besides the golf players. Well, the boats are still out in West Cork and an enquiry as to the occupation of the owners returns the answer — doctors and lawyers. The Electricity Supply Board had a great year for profits and a new electricity levy — which despite its green labelling, will mainly finance carbon-dioxide emitting peat power plants — will be on everyone’s bills just in time for winter. A friend at an architecture firm explains that after slashing employment 75 percent, overseas business is now back up and some laid off people might get their jobs back. Apparently Middle East oil money is creating good work for people willing to travel. And as the next wave of emigration gets started, 20 years after the last one was ending, it’s currently viewed as an experience that is important when you live in a small country rather than as an indication of long-term gloom. Go abroad, get the training, come back when things are a bit better.

And yet it’s not clear that the worst is over. The banks haven’t yet made a big move on distressed home mortgages and no one is clear what will happen when forebearance is no longer a viable strategy. Notwithstanding the government’s attempts to compare tax revenue to “profile” (i.e. a very recent projection), the fact is that tax revenue is stagnant at last year’s depression-like levels despite an apparent recovery in economic statistics. And while there are those desperate hotels, the tourists (or at least those who stray from the cautiously priced package tours) will still find fussy and expensive restaurants (plus VAT).

Are there any tricks left in the bag? The government is looking at privatization, most likely as a way to realize a large amount of cash at fairly short notice — essentially a portfolio switch of state-owned companies for all the bank liabilities it has taken on. And there are some bizarre Thatcherite echoes in the possible appearance of a poll tax by the end of the year (dressed up as a “flat rate” water charge or property tax). The public sector unions are back onside for now with a deal guaranteeing no further pay cuts and postponed pension reform for incumbents, so some semblance of the “social harmony” (i.e. lack of riots) that has so impressed international commentators is still there.

But, if you don’t work for the government directly or indirectly (as with the doctors and lawyers) or for some type of export operation, do you have any firm idea what you’ll be doing 3 years from now? For a country facing such inponderables, the statis in its politics is remarkable. But that’s for another post.

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And here's a very interesting bit of speculation from someone who often makes sense:

http://gregpytel.blogspot.com/2010/08/irish-lesson.html

Saturday, 14 August 2010

<a href="http://gregpytel.blogspot.com/2010/08/irish-lesson.html">Irish lesson

The UK government was warned in the article “Prime Minister, sort out this mess, please” about the risk that by making all the savings and cuts, without taking adequate protective steps, it is is “inviting” the “financial markets” to downgrade the UK rating. I.e. the saving and cuts are very likely to be perceived by the “markets” as the government's increased capacity to borrow short term by the amount of those cuts and savings. Hence it will be able to pay more in interests to the “financial markets”. There seems to be a little doubt that the “financial markets” are not going to miss such opportunity to get even more money from the taxpayers. “Financial markets” have a very short term strategies. Practically it is all about to the next bonus, a Madame Pompadour view of the world: “aprés nous le déluge”. As it seems the credit rating agencies do not play a role of objective judge of credit worthiness but are merely tools for making money by the “financial markets” players.

After the article “Prime Minister, sort out this mess, please” was published this is precisely what happened to Ireland. On 19 July 2010 The Irish Times announced having made massive spending savings, cuts and implemented austerity measures, Ireland rating was downgraded. The same strategy of the “financial markets” can reasonably be expected towards Britain. This is how the "financial markets" work these days. Indeed they are already half way there, i.e. the government announced saving and cuts without taking adequate protective measures. And the reasons for the UK downgrade will not be important: they will always be found.

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I wonder if the bankstas will end up owning everything without having paid a (real) penny? 

thats always been the plan & don't they already control most of it.

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thats always been the plan & don't they already control most of it.

Its what happens when you let them live.

they are the ONLY ones being bailed.

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After the article “Prime Minister, sort out this mess, please” was published this is precisely what happened to Ireland. On 19 July 2010 The Irish Times announced having made massive spending savings, cuts and implemented austerity measures, Ireland rating was downgraded. The same strategy of the “financial markets” can reasonably be expected towards Britain. This is how the "financial markets" work these days. Indeed they are already half way there, i.e. the government announced saving and cuts without taking adequate protective measures. And the reasons for the UK downgrade will not be important: they will always be found.

They should never have listened to the bond investors. Who told them to do austerity.. then when they did austerity they got downgraded. Meanwhile the USA and the UK never did austerity and just printed money to fund the debt, and they never got downgraded.

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thats always been the plan & don't they already control most of it.

The old scam is the bankers cause a deflation meaning vast amounts of debtors cannot pay them back. The bankers then seize the assets. Once the bankers have the assets, they reopen the floodgates of credit/money which makes the assets valueable again.

The Irish banksters seem to have a new trick too. Seize the defaulted assets like hotels. Then deny credit to competing hotels to drive them out of business. While providing cheap credit to invest in the bank owned hotels.

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  • 152 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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