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Bank Systemic Risk Report From Fitch Ratings

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Take a look at the Fitch Ratings report on Bank Systemic Risk around the world. It is truly dynamite. The agency has identified the six countries in world with highest level of "macro-prudential vulnerability".

It rates as highest risk those countries with the highest ratios of private credit to GDP. Iceland is the worst, private sector credit stood at 218.1% of GDP in 2005, having risen by 45% that year alone. Many of you will know that the Icelandic economy is about to roll over big time - inflation is spiking, its currency is collapsing and interest rates are soaring.

Which country is next on Fitch's list? You guessed it - Ireland.

Ireland's private credit stood at 212.9% of GDP in 2005 and is rising by around 30% per annum (according to most commentators). This is about as bad as it gets.

Ireland's position however is interesting, it doesn't have its own currency (if it did, I suspect it would be falling through the floor right now) and it cannot set its own interest rate, so the imbalances identified by the report cannot correct naturally. We are truly in uncharted territory. This implies that the situation is going to get a whole lot worse before it finally blows up.


Edited by Flash

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property prices to go up 20%+ in Ireland this year, sentiment appears more bullish that just 6mths ago

and the more people borrow the higher prices will go. However, the principal has to be repaid eventually.

I agree that sentiment is unwavering. Much of the credit growth of this year will find its way into overseas property markets. It seems that everywhere I turn I am hearing third hand stories of people "investing in Bulgaria".

The prevailing opinion is that buying shares in AIB or Tesco is risky, but borrowing €100k to give to a dodgy overseas property developer is a solid investment. :blink:

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  • 301 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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