How Iceland is Safe & Ireland is Screwed

cozzy121

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If only lenihan would swallow his pride and listen to McWilliams, but he's probably still scared of bertie who wants Mcwilliams dead.

Recovery is going to be local | David McWilliams

Iceland’s main interest rate was lowered on Friday to 6.25 per cent, while its ten-year debt is also trading around this level. Ireland’s cost of long-term, borrowing rose on Friday to 6.5 per cent. The country that defaulted on debts, shut down its delinquent banks, burned the bondholders, allowed its currency to fall and did everything ‘wrong’, according to the Irish establishment now, is regarded by the financial markets as a safer bet than Ireland.
The truth is that – as this column has been arguing for over a year and half now- our banking policy is verging on the financially suicidal.
 


spotty

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We need an election right now. We need to get Enda Kenny in and give him a mandate to fix all this. Enda, as Taoiseach, will see us through the dark valley that we have been cast into, and will lead us proudly and determinedly towards the sun-honeyed uplands of prosperity.

Fact.
 

'orebel

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It's ok. We're saved. Just heard on newstalk that the Govt. has a plan to create 300,000 jobs. Smart economy blah blah blahblah
 

cozzy121

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We need an election right now. We need to get Enda Kenny in and give him a mandate to fix all this. Enda, as Taoiseach, will see us through the dark valley that we have been cast into, and will lead us proudly and determinedly towards the sun-honeyed uplands of prosperity.

Fact.
Can't wait till your Labour membership papers are finalised!
 

Cassandra Syndrome

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It wasn't that long ago that if you mentioned Iceland readjusting on its own for the benefit of their people, you were mauled by the fanatical Eurotrons.

The Euro is killing us.
 

Clanrickard

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If only lenihan would swallow his pride and listen to McWilliams, but he's probably still scared of bertie who wants Mcwilliams dead.

Recovery is going to be local | David McWilliams
Don't worry. We voted YES to Lisbon which we were told meant YES to jobs so they'll be right along. Don't worry that JC Trichet head of the ECB has said we are our on our own because we are in the EU and everything will be honky dory.
 

goosebump

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Iceland hasn't defaulted on any debt, and and has borrowed heavily from the IMF and others at penal rates to stay afloat.

Iceland's currency devaluation has resulted 30%+ inflation in just 2 years, and a tripling in unemployment.

Its true that the Icelandic Government forced a debt-equity on bondholders swap in relation to their banks, but the Icelandic taxpayer is still on the hook for billions in deposits.

McWilliams regardly touts this line this line about Iceland, as if its some sort of post-recessionary Shangri-La, but the reality is quite different.
 

Ootermus

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Another McWilliams article only loosely based in fact - Iceland can borrow in Icelandic Krona at 6.5% for 10 years, but remember, it can print as much of that stuff as it wants, its not going to "default" on its own currency. Further, due to capital controls, no one can actually sell the stuff externally right now, its just locals buying it.

If Iceland wants to borrow in Euro's (which is cant - no one will lend to it for the reason above about printing tons of cash), its EUR bonds (which it hasnt been able to issue for 4 years) trade at around 7% for 2 YEARS! Thats vs 2yr Irish @ 3.92%.

David, as always, likes to tell a good yarn, even if the facts dont always back it up.
 

cozzy121

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Phew the bertie-apologists have arrived, we're saved!!!!
 

ChickenBiryani

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In addition to the previous two posters, can I also point out another inconvenient fact that doesn't support McWilliams. Even if Iceland was genuinely "sorted" now, it wouldn't represent a good comparison because the nature of Icelands crisis was completely different to Irelands.

Iceland allowed its banks to become quasi-hedge funds who amassed enormous external funding and downright fraudulently gambled it away via special purpose vehicles through stock markets and lining certain bank employees pockets. It was a Bernie Madoff style ponzi scheme that was a sort of an open giggle in financial markets until the ponzi ended.

It was nothing so broad based as the Irish property boom, with the banks being intermediaries and ultimately conduits to private mortgage debt.

Iceland also had the advantage of having done this on a scale so absolutely astronomical relative to size (6-8 time gdp) that there was no conceivable way it could be paid back, so default was the only option.
 

goosebump

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Another McWilliams article only loosely based in fact - Iceland can borrow in Icelandic Krona at 6.5% for 10 years, but remember, it can print as much of that stuff as it wants, its not going to "default" on its own currency. Further, due to capital controls, no one can actually sell the stuff externally right now, its just locals buying it.

If Iceland wants to borrow in Euro's (which is cant - no one will lend to it for the reason above about printing tons of cash), its EUR bonds (which it hasnt been able to issue for 4 years) trade at around 7% for 2 YEARS! Thats vs 2yr Irish @ 3.92%.

David, as always, likes to tell a good yarn, even if the facts dont always back it up.
He is also factually inaccurate in relation to the IceSave controvesy, in suggesting that 'people power' has resulted in the State deciding not to pay back the UK and Netherlands deposits.

That was not what was rejected. What was rejected was the mechanism. The deposits will still be repaid, just under a different, as yet undecided, mechanism.
 

goosebump

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Not one house has been repossessed in Iceland
The Icelandic Debt crisis was institutional, not private.

ie

the bank's themselves were the lendees, as opposed to the bank's customers.

Our crisis is one of private debt

ie

the banks borrowed and lent to customers, and now those customers can't pay the loans back, which means the banks are insolvent.

The State's role is effectively to pay back the loans via borrowing which will ultimately be repaid by taxpayers.
 

Cassandra Syndrome

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Iceland hasn't defaulted on any debt, and and has borrowed heavily from the IMF and others at penal rates to stay afloat.

Iceland's currency devaluation has resulted 30%+ inflation in just 2 years, and a tripling in unemployment.

Its true that the Icelandic Government forced a debt-equity on bondholders swap in relation to their banks, but the Icelandic taxpayer is still on the hook for billions in deposits.

McWilliams regardly touts this line this line about Iceland, as if its some sort of post-recessionary Shangri-La, but the reality is quite different.
What planet are you on?

Iceland Inflation currently 5%
Last 2 years 15% from base point.
Last 3 years 25% from base point.
It peaked briefly at 18% in late 2008

Its unemployment is at 7%, what's ireland's in comparison?

Its economy has contracted at between 10% and 15% since 2008, ours 25% to 30%

Its budget deficit is 6% of GDP, Irelands last year 15% this year 25% worse again if you use GNP

Iceland's General Government Debt to GDP is 75%

Their house prices are now increasing, their business fixed capital formation is increasing rapidly. Their bond yields are under 6% from 18% back in 2008 and thats in line with their interest rate and inflation.

Their CDSs are under 400.

They are a utopia in comparison to this kip

http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=8048
 

cjudge

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Thanks for that data CS. I think our unemployment is running at about 13%.

I think we could do with Eva Joly advising our government too!
 

cjudge

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Thanks for that data CS. I think our unemployment is running at about 13%.

I think we could do with Eva Joly advising our government too!
 

ChickenBiryani

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You have actually inadvertently supported the point I made earlier on. Iceland was not a good comparison to Ireland as the nature of its crisis was completely different. It did not suffer a broad based credit bubble, widely participated in by the population at large, and spent institutionally by the government on long term spending commitments. As a result, its been relatively easy for them to default because the real economy wasn't doing too badly in the first place.

What planet are you on?

Iceland Inflation currently 5%
Last 2 years 15% from base point.
Last 3 years 25% from base point.
It peaked briefly at 18% in late 2008

Its unemployment is at 7%, what's ireland's in comparison?

Its economy has contracted at between 10% and 15% since 2008, ours 25% to 30%

Its budget deficit is 6% of GDP, Irelands last year 15% this year 25% worse again if you use GNP

Iceland's General Government Debt to GDP is 75%

Their house prices are now increasing, their business fixed capital formation is increasing rapidly. Their bond yields are under 6% from 18% back in 2008 and thats in line with their interest rate and inflation.

Their CDSs are under 400.

They are a utopia in comparison to this kip

http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=8048
 

kerdasi amaq

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the tap: Ireland's A Gonner

Sometimes it takes an outsider to see things clearly. The debts of Ireland's nationalised banks are five times Irish GDP. The country's austerity programme is already severe but is still not nearly enough to bring the government's finances back into shape.


There is only one outcome possible from here. The EU are in denial. They will delay and defer as long as they can. But each delay merely worsens and prolongs the depression in Ireland, which is sending the Taoiseach, Brian Cowen, into a state of near mental collapse, as a recent radio broadcast revealed, where he seemed to be losing it completely.
and doing it in the middle of election campaign will complicate matters.
 

Keith-M

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Iceland did two things that we couldn't do, they devalued their currency and they refused to pay the people who had invested/lost money in Icelandic banks. Our EU membership preventing us from doing both.

Now do we really want to go over the Lisbon II all over again. I really don't like to use the "I told you so" tag, but in this case I'll be glad to make an exception. In Lisbon II we gave up any pretence of being able to do our own thing. The arrival of the IMF to run our economy will be the final naill in the coffin of Irish independence. (Not that I think that that's a bad thing).
 


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