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The True Cost Of The Irish Bailout

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Spotted this on ZH, thought it was worth re-posting here.

"Everyone expected a number between 5% and 6.7% on the Irish rescue interest rate. However, when one considers that the NPRF, which will serve as a source of capital in the rescue package has a zero interest rate (Ireland will not be paying interest to itself), and amounts to 20% of the total bailout figure, it appears that the blended rate of new money is actually 7.25%. From politics.ie: "Presumably the pensions reserve funds are at 0%, as its already our money. They form about 20% of the total amount. If one fifth of the amount is at zero percent, and the average is 5.8% - what is the interest on the rest of the money? I calculate 7.25%"

Oh dear...I do hope some of our Irish members make this information available to their fellow German citizens.

My own take on why the Irish Political class have been so eager to sell their country men into perpetual bondage is that any state that is dependent on deficit spending (due to uncosted, politically expedient welfare promises) is utterly subservient to the bond market and the banks who prop it up. They can't exist without them.

The political class (regardless of it's political complexion),of any debt and deficit riddled state will always bail the banks out first in the face of public hostility , as in effect they are bailing out themselves, their lifestyles and their powerbase.

The deficit State cannot exist without the banks. It was never about "the banks being too big to fail" or "saving the system".

It's all about The politicians who are desperately trying to save themselves.

Never forget, that these filth have just turned you, your kid's and your grandchildren into chattel. You are now bonded to the Bundesbank. Suck it up.

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Spotted this on ZH, thought it was worth re-posting here.

"Everyone expected a number between 5% and 6.7% on the Irish rescue interest rate. However, when one considers that the NPRF, which will serve as a source of capital in the rescue package has a zero interest rate (Ireland will not be paying interest to itself), and amounts to 20% of the total bailout figure, it appears that the blended rate of new money is actually 7.25%. From politics.ie: "Presumably the pensions reserve funds are at 0%, as its already our money. They form about 20% of the total amount. If one fifth of the amount is at zero percent, and the average is 5.8% - what is the interest on the rest of the money? I calculate 7.25%"

Oh dear...I do hope some of our Irish members make this information available to their fellow German citizens.

My own take on why the Irish Political class have been so eager to sell their country men into perpetual bondage is that any state that is dependent on deficit spending (due to uncosted, politically expedient welfare promises) is utterly subservient to the bond market and the banks who prop it up. They can't exist without them.

The political class (regardless of it's political complexion),of any debt and deficit riddled state will always bail the banks out first in the face of public hostility , as in effect they are bailing out themselves, their lifestyles and their powerbase.

The deficit State cannot exist without the banks. It was never about "the banks being too big to fail" or "saving the system".

It's all about The politicians who are desperately trying to save themselves.

Never forget, that these filth have just turned you, your kid's and your grandchildren into chattel. You are now bonded to the Bundesbank. Suck it up.

In the case of Ireland, the sudden need for a huge bailout has nothing to do with out of control state spending. Ireland ran a fiscal surplus in the years before the collapse - albeit funded by the property boom. The national debt was extremely small.

The current crisis is entirely down to the fact that the Fianna Fail 'gombeenocracy' decided to bail out their chums/paymasters in the the property development and banking sector by taking their massive losses onto state books. As pointed out by many at the time, the state could not deal with that level of toxic debt. Lenders on the bond markets have figured that those losses make Ireland very unlikely to be able to service future debt and are thus demanding a massive premium for the risk of lending.

This so-called 'bailout' will do nothing except kick the can down the road. It's like taking on an Ocean Finance consolidation loan to amalgamate all your debt into one monthly payment. Ireland is still massively in debt and paying a high interest rate and that makes it very unattractive for future loans. The best option (given that they stupidly took on the banksters losses) would have been to default and negotiate a haircut for the bank bondholders.

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Spotted this on ZH, thought it was worth re-posting here.

"Everyone expected a number between 5% and 6.7% on the Irish rescue interest rate. However, when one considers that the NPRF, which will serve as a source of capital in the rescue package has a zero interest rate (Ireland will not be paying interest to itself), and amounts to 20% of the total bailout figure, it appears that the blended rate of new money is actually 7.25%. From politics.ie: "Presumably the pensions reserve funds are at 0%, as its already our money. They form about 20% of the total amount. If one fifth of the amount is at zero percent, and the average is 5.8% - what is the interest on the rest of the money? I calculate 7.25%"

This interest payment represents around 30% of current spending does it not?

This can not be sustainable, can it?

IF the Irish could cut all public spending by 90% (is this possible) with the projected shrinking of tax receipts could it even be sustainable then?

I suppose someone must have done the maths and got it to work.

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The current crisis is entirely down to the fact that the Fianna Fail 'gombeenocracy' decided to bail out their chums/paymasters in the the property development and banking sector by taking their massive losses onto state books. As pointed out by many at the time, the state could not deal with that level of toxic debt. Lenders on the bond markets have figured that those losses make Ireland very unlikely to be able to service future debt and are thus demanding a massive premium for the risk of lending.

This so-called 'bailout' will do nothing except kick the can down the road. It's like taking on an Ocean Finance consolidation loan to amalgamate all your debt into one monthly payment. Ireland is still massively in debt and paying a high interest rate and that makes it very unattractive for future loans. The best option (given that they stupidly took on the banksters losses) would have been to default and negotiate a haircut for the bank bondholders.

If there is no hope of recovering the money why on earth would you lend them the money? It's like lending money to a conman, charge a high premium and then wonder why you've not got a penny back.

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...so BOI and Anglo should be offering 7.25% savings accounts then?

After higher rate tax, they'd almost beat RPI too...

Wouldn't it be great if this really happened? The Irish helping UK savers in return for the UK backstopping their economy?

Is this how money works? If not, why not?

Edited by AvidFan

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Spotted this on ZH, thought it was worth re-posting here.

"Everyone expected a number between 5% and 6.7% on the Irish rescue interest rate. However, when one considers that the NPRF, which will serve as a source of capital in the rescue package has a zero interest rate (Ireland will not be paying interest to itself), and amounts to 20% of the total bailout figure, it appears that the blended rate of new money is actually 7.25%. From politics.ie: "Presumably the pensions reserve funds are at 0%, as its already our money. They form about 20% of the total amount. If one fifth of the amount is at zero percent, and the average is 5.8% - what is the interest on the rest of the money? I calculate 7.25%"

Oh dear...I do hope some of our Irish members make this information available to their fellow German citizens.

I saw that too. And what puzzled me a bit was according to an IMF press release the rate on the IMF portion of the loan is between 3% and 4%.

And the breakdown acccording to Bloomberg is:

"Ireland said it will pay average interest of 5.8 percent on the loans, which break down into 45 billion euros from European governments, 22.5 billion euros from the IMF and 17.5 billion euros from Ireland’s cash reserves and national pension fund."

Which I make to be about 9.2% on the contribution from the European governments. Presumably I've missed something, as that is just market rate.

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I saw that too. And what puzzled me a bit was according to an IMF press release the rate on the IMF portion of the loan is between 3% and 4%.

And the breakdown acccording to Bloomberg is:

"Ireland said it will pay average interest of 5.8 percent on the loans, which break down into 45 billion euros from European governments, 22.5 billion euros from the IMF and 17.5 billion euros from Ireland’s cash reserves and national pension fund."

Which I make to be about 9.2% on the contribution from the European governments. Presumably I've missed something, as that is just market rate.

Well spotted.

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If there is no hope of recovering the money why on earth would you lend them the money? It's like lending money to a conman, charge a high premium and then wonder why you've not got a penny back.

They don't reckon 'no hope' - just a high probability of default based on current financial data. Hence the loan is priced accordingly. Always someone willing to take a chance in return for high returns.

I don't see that the fundamentals have really changed - Ireland's existing debt losses (so graciously taken off the banks' books) mean that 'bailout' or not, it's still a poor candidate for future loans unless you think that any such loans would be backstopped by the ECB.

Since Merkel is now talking about haircuts in the future for bondholders (existing bondholders safeguarded), that makes Ireland an even riskier proposition for future lending.

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...so BOI and Anglo should be offering 7.25% savings accounts then?

After higher rate tax, they'd almost beat RPI too...

Wouldn't it be great if this really happened? The Irish helping UK savers in return for the UK backstopping their economy?

Is this how money works? If not, why not?

Well logic dictates that a saving rate on larger deposites of over 5% should be a given. The government would also get its cut in the form of tax. A win win win situation. Will push saving rates up for sure.

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Does it matter what the interest rate is?

Can they pay any of it back?

Yes, easily, given their can afford the very generous tax free allowance. 15K tax free isn't it?

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I saw that too. And what puzzled me a bit was according to an IMF press release the rate on the IMF portion of the loan is between 3% and 4%.

And the breakdown acccording to Bloomberg is:

"Ireland said it will pay average interest of 5.8 percent on the loans, which break down into 45 billion euros from European governments, 22.5 billion euros from the IMF and 17.5 billion euros from Ireland’s cash reserves and national pension fund."

Which I make to be about 9.2% on the contribution from the European governments. Presumably I've missed something, as that is just market rate.

Maybe, as they don't pay interest on the money its not included in the calculation? ZH are just being idiots.

Also, they won't be drawing on all the money immediately, so not paying interest on it until they do.

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Does it matter what the interest rate is?

Can they pay any of it back?

Have they got a fixed rate, tracker or SVR ?

Hope they didn't tell any porkies on the application form........

:D

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Have they got a fixed rate, tracker or SVR ?

Hope they didn't tell any porkies on the application form........

:D

Do you have any collatoral?

Yes, Ireland.

or

My unborn son, my neighbours unborn son, my neighbours neighbours unborn son, my neigh.....

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Does it matter what the interest rate is?

Can they pay any of it back?

Yes, Ireland can pay all of it back.

Ireland ISN'T BANKRUPT.

They could slash public services and benefits and healthcare. They could allow the people of Ireland to SUFFER in order to pay back the debt. It's just they would rather keep having their nice comfy lives thank-you-very-much and thankyou-and-f***you to all the people they borrowed money from living a jolly life for the last 10 years.

Ireland IS NOT BANKRUPT, it just doesn't WANT to pay it's debts.

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Yes, Ireland can pay all of it back.

Ireland ISN'T BANKRUPT.

They could slash public services and benefits and healthcare. They could allow the people of Ireland to SUFFER in order to pay back the debt. It's just they would rather keep having their nice comfy lives thank-you-very-much and thankyou-and-f***you to all the people they borrowed money from living a jolly life for the last 10 years.

Ireland IS NOT BANKRUPT, it just doesn't WANT to pay it's debts

You mean make good the bad bets of the German and Irish bankers who gambled and lost all their bondholders money? Are you a socialist?

The way this game is played is that the investors take a risk for a return- and they lost. So why should the people of Ireland make good their bad bets?

You seem very keen on suffering- so what about spreading it about a bit- what about the feckless idiots who let the banksters loose with their money taking a hit for a change?

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Yes, Ireland can pay all of it back.

Ireland ISN'T BANKRUPT.

They could slash public services and benefits and healthcare. They could allow the people of Ireland to SUFFER in order to pay back the debt. It's just they would rather keep having their nice comfy lives thank-you-very-much and thankyou-and-f***you to all the people they borrowed money from living a jolly life for the last 10 years.

Ireland IS NOT BANKRUPT, it just doesn't WANT to pay it's debts.

The Irish state is not bankrupt, but the banks are. Why should clueless people have to pay the debts of the clued-in bankers? The state has ownership of a large part of the Irish banks, but it can rescind its awful guarantee.

RBS etc will be pushed into admitting the true state of its affairs. The UK is then left with the giant problem of disposing of an 84% stake in the biggest bank in the world - not a guarantee, actual ownership. Snigger. The Queen may even have to recall the Shred's knighthood.

The negotiations are at an early stage. Violent socialists lurk in the wings. All very unjust, but anarchy is not in the cards - it will make for good TV, while a general settlement is reached.

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They don't reckon 'no hope' - just a high probability of default based on current financial data. Hence the loan is priced accordingly. Always someone willing to take a chance in return for high returns.

I don't see that the fundamentals have really changed - Ireland's existing debt losses (so graciously taken off the banks' books) mean that 'bailout' or not, it's still a poor candidate for future loans unless you think that any such loans would be backstopped by the ECB.

Since Merkel is now talking about haircuts in the future for bondholders (existing bondholders safeguarded), that makes Ireland an even riskier proposition for future lending.

Merkels proposal is simply nuts. It would make far more sense to impose cuts on the existing bondholders who after all screwed up lending money to people who could not pay them back and to offer a modicum of protection to future lenders whose money might actually be used to help rebuild the Irish economy. But then Merkel is really only interested in getting the German banks cash back and does not give a f*ck about Ireland. This is why the Eurozone is doomed

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Yes, Ireland can pay all of it back.

Ireland ISN'T BANKRUPT.

They could slash public services and benefits and healthcare. They could allow the people of Ireland to SUFFER in order to pay back the debt. It's just they would rather keep having their nice comfy lives thank-you-very-much and thankyou-and-f***you to all the people they borrowed money from living a jolly life for the last 10 years.

Ireland IS NOT BANKRUPT, it just doesn't WANT to pay it's debts.

The debts were not run up by the Irish state but by certain private individuals, property speculators and public limited companies.

If you truly believe in capitalism then they should pay the price of their bad business decisions not expect the Irish taxpayer to foot the bill

In addition the Irish banks were private corporations whose business was taking deposits and making loans. The fact that they screwed up mightily is a matter for their shareholders, bondholders and depositors not the general population of Ireland. In a capitalist system badly run businesses should be allowed to fail so that their resources and market share can be taken over by more efficient competitors.The fact that corrupt or stupid Irish politicians have colluded with those responsible for the crisis to socialise the bank losses onto the Irish taxpayer does not make it right. In fact the rush to get the IMF/ESFS deal in before a General Election is a complete travesty of democracy

The whole point of a capitalist free market is that you get all the profits when you get your investments right and you take all the losses when it goes wrong.

What you are suggesting is some form of socialism for the rich who apparently are entitled to unlimited state benefits if their investment decisions turn sour while the poor have to face the full rigour of the market.

This is Bourbon Capitalism as it might have been envisaged in the Court of Louis XVI and we all know how that ended.

Edited by realcrookswearsuits

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Yes, Ireland can pay all of it back.

Ireland ISN'T BANKRUPT.

They could slash public services and benefits and healthcare. They could allow the people of Ireland to SUFFER in order to pay back the debt. It's just they would rather keep having their nice comfy lives thank-you-very-much and thankyou-and-f***you to all the people they borrowed money from living a jolly life for the last 10 years.

Ireland IS NOT BANKRUPT, it just doesn't WANT to pay it's debts.

What's all this "they"?

Some Irish people have defaulted on their debts. Virtually all of the Irish banks are bust.

Those people/banks should default/be made to pay their debts.

Provide one single moral argument that holds water for why all of the Irish people should pay for the debts of some of them? Following your "logic", I take it you will be happy to pay for the debts of that bloke down the road who you don't know and who borrowed too much. I take it you will also be happy to bail out the f*ckwit banks who shoved all of this debt down his throat. Or, indeed, that you are happy to bail out your government who paid off all of those debts to the banks on your behalf with your future tax payments and by debasing the value of your savings without your permission.

Actually, it's worse than that....

I take it you will be happy for your kids and grandkids yet to be born to pay for those debts will you?

No?

Why's that then?

Or is it just that you apply your "free-market principles" only when it suits?

Edited by tallguy

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Found this on a builder-y forum I occasionally visit.

It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism. And that, Ladies and Gentlemen, is how the bailout package works.

Sure it's not as simple as that but a quaint way to look at it.

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It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism. And that, Ladies and Gentlemen, is how the bailout package works.

:lol: This reminds me of a school project I did as a kid about the canal system- in the bit about how the locks worked I had a carefully illustrated example in which, at a given point, the lock gate is opened and the water outside obediently remained suspended in mid air while the rest of the canal rose to meet it. It made perfect sense to me at the time and I wondered why the teacher found it so funny.

Edited by wonderpup

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  • 259 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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