Election announcements brings solidarity bonds back into play

feargach

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When the idea of solidarity bonds was first brought up here, the reaction was irrational but unanimous: "You won't catch me letting Lenihan get my money" as if the proposal of national solidarity bonds was to place funds directly into his pocket.

Now, that decoy non-answer's days have been numbered. The January election means that Lenihan has 10 weeks left in his post and his party is shortly to be dumped into irrelevance.

So now what's the excuse?

Ireland's need to borrow from her own citizens rather than from international loan sharks is more pressing than ever. At the moment, the delusional dream of a benevolent IMF intervention seems to hold sway in some sane peoples' heads, like the housing bubble did in its heyday. That dream will melt away quickly as reality bites. IMF men do not call themselves economic hit-men for nothing.

Argentina paid off its IMF debt early in order to reassert economic sovereignty after the IMF poisoned the Argentine economy under Menem. We will need to do likewise. You can recognise the need to do this early on, or wait a few years before it becomes undeniable, but it's only a matter of time before the truth becomes clear to all.
 


feargach

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The other way to look at it is the "what if..." scenario.

We all know that Ireland, as a people, chose the path of total rejection of the Solidarity bond.

Well, we now know just what a clever choice that was.

We know that if we had diverted a mere €5bn into the NSB a few months ago, that would have tided us over into the lapse period of the bank guarantee, at which point we could have cut the banks loose, and used some of the money to fund an emergency bank.

As a decision, it was self-evidently worse than Lenihan opting to unconditionally guarantee the banks.

Worse still, psychologically, we cannot put the blame on somebody else. For all that we were damaged by the nature of the guarantee, at least we can point the finger and say "Those individuals are responsible, not I".

But when it comes down to rejecting the path that might have averted this disaster, the scoundrel responsible is not some distant political figure in a Garda-driven limo service. The culprit is looking at you in the mirror. Youdunnit.
 

johnfás

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We would have to default before anybody would really buy them seriously. Everybody knows that a default is inevitable so why would you buy an Irish bond of any description at this point in time? Why wouldn't you just buy an Irish bond on the secondary market instead? It is giving a higher yield.
 

feargach

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We would have to default before anybody would really buy them seriously. Everybody knows that a default is inevitable so why would you buy an Irish bond of any description at this point in time? Why wouldn't you just buy an Irish bond on the secondary market instead? It is giving a higher yield.
What you're basically saying is as follows:

There is a guy lying on the street unconscious.

You can give him CPR, but that is difficult and there's a high likelihood that it won't work.

However, it is very easy indeed to steal the guy's wallet.

So, you suggest you should steal the wallet, as it's easier. In fact, you can pretend it's not even stealing by just saying "You don't mind if I take your wallet, do you?"
 

johnfás

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No - what I am saying is why would I lend more money to a man already underwater in debt. I would rather wait until he has sorted out his debt problems and then lend to him. On the other hand, the commercial decision would be to buy his existing debt from the bank as it is more likely that figure would be paid back first. That is the commercial decision.
 

feargach

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No - what I am saying is why would I lend more money to a man already underwater in debt
Because the man underwater in debt is you, not some other entity.

I said it before, unless you're planning to emigrate, not buying the NSB is a terrible idea. If the IMF borrowing rate turns out to be anything like the 7% being floated at the moment, then I have been proven right. (Actually I'd be right even if it was as low as 5%)
 

johnfás

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Because the man underwater in debt is you, not some other entity.

I said it before, unless you're planning to emigrate, not buying the NSB is a terrible idea. If the IMF borrowing rate turns out to be anything like the 7% being floated at the moment, then I have been proven right. (Actually I'd be right even if it was as low as 5%)
It is partly me. Sure if the State does badly I have to suffer more cuts and pay more tax. However, I am not going to voluntarily lend money to the State when it is quite likely I will not get that money back. If the Government does something to address the overhanging problem of current debt then I would enter the market to fund future debt. In current circumstances, I am not simply going to burn money when there are a plethora of other things I can do with my own personal savings.

 

feargach

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It is partly me. Sure if the State does badly I have to suffer more cuts and pay more tax. However, I am not going to voluntarily lend money to the State when it is quite likely I will not get that money back.
You're basically failing to see that money is interchangeable.

If the Government does something to address the overhanging problem of current debt then I would enter the market to fund future debt.
It's your responsibility to look after yourself, as well as the government's.


In current circumstances, I am not simply going to burn money when there are a plethora of other things I can do with my own personal savings.
No there isn't a plethora of other things. There is now only one thing you can do with your own personal savings.

You can give them to the IMF. That's all.
7% annually. That means the income from the debtor doubles every 10 years. Utterly crippling.

You won't HAVE any personal savings, of course. The Revenue will take the money off you at source, and leave you with barely enough to survive.
 

Watcher2

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The other way to look at it is the "what if..." scenario.

We all know that Ireland, as a people, chose the path of total rejection of the Solidarity bond.

Well, we now know just what a clever choice that was.

We know that if we had diverted a mere €5bn into the NSB a few months ago, that would have tided us over into the lapse period of the bank guarantee, at which point we could have cut the banks loose, and used some of the money to fund an emergency bank.

As a decision, it was self-evidently worse than Lenihan opting to unconditionally guarantee the banks.

Worse still, psychologically, we cannot put the blame on somebody else. For all that we were damaged by the nature of the guarantee, at least we can point the finger and say "Those individuals are responsible, not I".

But when it comes down to rejecting the path that might have averted this disaster, the scoundrel responsible is not some distant political figure in a Garda-driven limo service. The culprit is looking at you in the mirror. Youdunnit.
Hogwash.

No ther words to describe that.
 

Watcher2

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What you're basically saying is as follows:

There is a guy lying on the street unconscious.

You can give him CPR, but that is difficult and there's a high likelihood that it won't work.

However, it is very easy indeed to steal the guy's wallet.

So, you suggest you should steal the wallet, as it's easier. In fact, you can pretend it's not even stealing by just saying "You don't mind if I take your wallet, do you?"
Feargach, you're letting yourself down. Are you delerious with rage and frustration with the situation?
 

feargach

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Hogwash.

No ther words to describe that.
Correct, there is no rational argument against it. All you can do is curse when your miscalculation is proven so starkly.
 

Watcher2

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Because the man underwater in debt is you, not some other entity.

I said it before, unless you're planning to emigrate, not buying the NSB is a terrible idea. If the IMF borrowing rate turns out to be anything like the 7% being floated at the moment, then I have been proven right. (Actually I'd be right even if it was as low as 5%)
Oh no you wouldn't. In fact, you ahve no way of telling unless we travelled to a paralell universe and tried it out to see the outcome.

Listen, with the amount of ************************ this country is in, your pitiful 5bn purchase would at this stage be toast. Why else do you think the economists on PT last night were talking about figures north of 200bn? How does your paltry 5bn stack up against that?

Please enlighten us oh deluded one.
 

feargach

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As I already said:

The bank guarantee is what sank us. The 5bn would have been enough to see us through until the guarantee lapsed.

Then we could have cut the banks (apart, possibly, from BOI) loose. In the interim between collecting the (hypothetical) €5bn and the letting-go of the banks, we'd have called an emergency and set up the National Recovery bank, funded with €2bn. This would then be lending €20bn (using a very conservative fractional-reserve ratio).

The banks' creditors would make a debt-for-equity swap with mortgage holders.
 

Watcher2

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As I already said:

The bank guarantee is what sank us. The 5bn would have been enough to see us through until the guarantee lapsed.

Then we could have cut the banks (apart, possibly, from BOI) loose. In the interim between collecting the (hypothetical) €5bn and the letting-go of the banks, we'd have called an emergency and set up the National Recovery bank, funded with €2bn. This would then be lending €20bn (using a very conservative fractional-reserve ratio).

The banks' creditors would make a debt-for-equity swap with mortgage holders.
OK, thats slightly different to what I took from your post. I do however take issue with your idea that 5bn would have tied us over and all would be grand. Hell, we may even have a second celtic tiger, eh?

Nah, if 5bn would have saved us, why didn't 35bn, or 50bn or whatever amount of silly money they have thrown at the banks.

You see, you cant say for certain what 5bn in NSBs would have done because it didn;'t happen. The only thing we can say for certainty is what actually happened and that would the huge chunk of cash (more than 5bn) that has been pumped into the banks has not saved us.

Now, going into wholesale default and forcing the emergency is a radical idea. I think this could have forced a few issues and perhaps some proper decisions taken, however, that didn't happen either.

Listen, its not your whole idea I have an issue with, its blaming scared people for not buying a stupid NSB with which I take issue. Your ire should be at the renewing of the guarantee which I think is the crux of your idea.
 

feargach

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Listen, its not your whole idea I have an issue with, its blaming scared people for not buying a stupid NSB with which I take issue.
I don't accept it was a stupid idea. You know yourself that there was at least a fighting chance that it could have worked. The course we took, of shivering like scared bunnies and just doing nothing was a guaranteed disaster.

Imagine that the entire €5bn was totally wasted. Instead of being in the hole for €200bn, we'd be in the hole for €205bn.

Ohnoes! Panic, panic! Our lovely, comfy debt of €200bn has increased by the cumbersome, awful, terrifying figure of one-fortieth! EEEEEK!

In American football, there's a tactic called the Hail Mary pass. It is appropriate when the team is behind, and a touchdown would save the game. The high chance that it would fail, or allow the opponents to score, doesn't matter at that point as it wouldn't affect the outcome.

The idea of buying €5bn of bonds was, arguably, a Hail Mary pass. If it didn't work out, we would have felt no worse.

If it had worked out, we'd be in a much improved condition than we are now.

Most of us will see our savings reduced to zero in any event.
 
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Hazlitt

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Jesus Christ :roll: not ANOTHER thread on the national solidarity bonds by feargach.

You want people to spend their hard-earned money, what little of their excess cash balances they have (during a recession) to INCREASE the govt (taxpayer) debt they owe which can only be paid back by they themselves being taxed more! Absolute, and undeniable BATSH1T. The government needs to STOP piling on debt. We need to CUT our spending to below our income levels now, and on top of that we need to be selling off state assets to reduce the burden on the citizens.
 

Libero

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feargach said:
I said it before, unless you're planning to emigrate, not buying the NSB is a terrible idea
I don't mean to be dismissive, but it would help your argument if you read up on the economic theory of collective action, with a particular focus on the free rider problem.

As it stands, you're really not convincing anyone that their individual contribution (or non-contribution) to the state's funding problem will, by itself, make a material difference.

If anything, come default, the state will hit NSB savers first; if they were selfless enough to contribute the money in the first place, they'll understand why they can't have it all back. No?
 

Fides

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.

The idea of buying €5bn of bonds was, arguably, a Hail Mary pass. If it didn't work out, we would have felt no worse.

If it had worked out, we'd be in a much improved condition than we are now.

Most of us will see our savings reduced to zero in any event.
Presumably that depends where your savings are.

As for emigration it is always a possibility though I don't fancy it at this stage in my life. But if i have to I will.
 

feargach

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I don't mean to be dismissive, but it would help your argument if you read up on the economic theory of collective action, with a particular focus on the free rider problem.

That's actually the first response that's ever come close to the nub of it. Give yourself a reward for being the first person to make an intelligent response to this issue!

Free riders are intensely annoying, but they basically must be suffered by the people who act collectively, if they see any great urgency in solving the problem in the first instance. Besides, solving the problem if the urgent matter. After you've done that, you can direct your attention to the free riders.

Japan and Brazil, for example, have plenty of free riders, but they do not let that get in the way of getting the job done. Essentially your problem is "well, that's all very well in practice (in Tokyo and Brasilia) but how does it work as a theory?"

If anything, come default, the state will hit NSB savers first; if they were selfless enough to contribute the money in the first place, they'll understand why they can't have it all back. No?
Hard to see an Irish court going along with that. Judges salaries and pensions are paid for by public borrowing. They're not suicidal, even if Joe Average is willing to let anger turn him into a lemming.
 


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