Interest on the Bank Debt Accoutns for 1.6bn Annual Deficit

Sucker Punch

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Enumerated cost of rescuing the banks and the on going costs of servicing this debt in terms of the fiscal deficit has been revealed.

(Bare in mind the fiscal adjustment for this year is circa 2bn).

The annual cost of servicing the debt associated with the financial sector bailout in Ireland in 2008 is estimated at about €1.6 billion, according to figures provided by Minister for Finance Michael Noonan.

This is from an expected cost of €8 billion to service Ireland’s sizeable national debt this year.
Bank bailout debt costing State

Outstanding questions are:


  1. What happens to the rebated interest once the CB ships on the Government bonds used to replace the Anglo promissory notes?
  2. What now of Ireland's 'special case' and what are the chances of having some/all of this debt being repudiated/renegotiated?
 


He3

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The State budget is in trouble on two fronts. As you say, it is stretched beyond breaking by excess debt taken on for private benefit rather than public. But it is also still too close to bubble era spending otherwise afaics.

Most people (including me) tend to focus only on one of the two fronts. That would be a mistake.
 

ShoutingIsLeadership

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STFU, you left-wing, money-tree loving kn0b. You have been repeatedly told by certain posters around here, that the cost of bailing out the banks has been negligible and that having banking debt written off would have no impact on our budgetary difficulties.

Get with the programme.
 

Cdebru

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Enumerated cost of rescuing the banks and the on going costs of servicing this debt in terms of the fiscal deficit has been revealed.

(Bare in mind the fiscal adjustment for this year is circa 2bn).



Bank bailout debt costing State

Outstanding questions are:


  1. What happens to the rebated interest once the CB ships on the Government bonds used to replace the Anglo promissory notes?
  2. What now of Ireland's 'special case' and what are the chances of having some/all of this debt being repudiated/renegotiated?

That's the cost they are admitting to and plays with the whole "the bank debt is not the problem" spin that various sections have been spouting the last few years.

This is based on 41 billion of debt being attributable to bank debt but the cost of the bail out was 64.1 billion so it is like the other 23.1 billion was free money that has not no cost or loss of income to the state.
 

Taxi Driver

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Enumerated cost of rescuing the banks and the on going costs of servicing this debt in terms of the fiscal deficit has been revealed.

(Bare in mind the fiscal adjustment for this year is circa 2bn).

Bank bailout debt costing State

Outstanding questions are:


  1. What happens to the rebated interest once the CB ships on the Government bonds used to replace the Anglo promissory notes?
  2. What now of Ireland's 'special case' and what are the chances of having some/all of this debt being repudiated/renegotiated?
1. Once the bonds are sold the interest will be paid to whoever holds the bonds. At the moment the interest is paid to the Central Bank so while the total outgoing might be €1.6bn a big chunk of that is paid to the Central Bank which just cycles it back to the government. The net cost is less than €1.6bn.

2. No idea.
 

ShoutingIsLeadership

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1. Once the bonds are sold the interest will be paid to whoever holds the bonds. At the moment the interest is paid to the Central Bank so while the total outgoing might be €1.6bn a big chunk of that is paid to the Central Bank which just cycles it back to the government. The net cost is less than €1.6bn.

2. No idea.

TD, at the moment, does the CB 'destroy' that money?
 

Sucker Punch

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The State budget is in trouble on two fronts. As you say, it is stretched beyond breaking by excess debt taken on for private benefit rather than public. But it is also still too close to bubble era spending otherwise afaics.

Most people (including me) tend to focus only on one of the two fronts. That would be a mistake.
True enough,

This is the first instance in the media that I am aware of that puts a figure on the banking crisis in terms of the fiscal deficit. To date the narrative has solely rested on the fact that the State is in deficit due to a shortfall in revenues. Most people assume that this is due to taxation not equaling expenditure, however this is wrong. The entirety of the fiscal deficit is made up of interest (of which there are several components) on the nation debt.
 

Taxi Driver

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That's the cost they are admitting to and plays with the whole "the bank debt is not the problem" spin that various sections have been spouting the last few years.

This is based on 41 billion of debt being attributable to bank debt but the cost of the bail out was 64.1 billion so it is like the other 23.1 billion was free money that has not no cost or loss of income to the state.
There have also been revenues from the banks - fees, interest, dividends etc. - and asset sales - Irish Life, contingent capital notes, equity in BOI etc.
 

Taxi Driver

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TD, at the moment, does the CB 'destroy' that money?
When the Central Bank sells the bonds it will obviously receive money. The Central Bank will use that to repay money that in essence it borrowed from itself. Central Banks can borrow from themselves as they can create money. The Central Bank will take the money from these sales and cancel the money that was created in the first place. So yes the Central Bank is going to 'destroy' that money.
 

Sucker Punch

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1. Once the bonds are sold the interest will be paid to whoever holds the bonds. At the moment the interest is paid to the Central Bank so while the total outgoing might be €1.6bn a big chunk of that is paid to the Central Bank which just cycles it back to the government. The net cost is less than €1.6bn.

2. No idea.
So when the CB moves the bonds on, it's safe to say that the interest no longer accrues to the state, ergo the 1.6bn figure stands?
 

Plebian

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That's the cost they are admitting to and plays with the whole "the bank debt is not the problem" spin that various sections have been spouting the last few years.

This is based on 41 billion of debt being attributable to bank debt but the cost of the bail out was 64.1 billion so it is like the other 23.1 billion was free money that has not no cost or loss of income to the state.
Yep, the NPRF eaten and then there's the compounding effect of borrowing year on year to pay the interest on the debt plus the effect a larger national debt has on interest rates charged on the debt.
 

ShoutingIsLeadership

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When the Central Bank sells the bonds it will obviously receive money. The Central Bank will use that to repay money that in essence it borrowed from itself. Central Banks can borrow from themselves as they can create money. The Central Bank will take the money from these sales and cancel the money that was created in the first place. So yes the Central Bank is going to 'destroy' that money.
Sorry, I meant the interest currently paid on the money.
 

Terry Malloy

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Jesus .... still can you imagine how much worse it would have been if it was Frankfurts way instead of Labours way ?
 

Researchwill

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That's the cost they are admitting to and plays with the whole "the bank debt is not the problem" spin that various sections have been spouting the last few years.

This is based on 41 billion of debt being attributable to bank debt but the cost of the bail out was 64.1 billion so it is like the other 23.1 billion was free money that has not no cost or loss of income to the state.
But the free money was created in the promissory note for 25 billion. Ireland created the PN, then lodged it with central bank, then pays interest to the central bank for that 25 billion, the central bank makes a profit of all that interest and guess who they give the money to. It was the greatest trick ever pulled. Now of course Ireland has promised to put equivalent bonds on the market in 500 million chunks over time. Then they will have to be paid for. But for as long at it lasts it is free money.
 

Sucker Punch

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But the free money was created in the promissory note for 25 billion. Ireland created the PN, then lodged it with central bank, then pays interest to the central bank for that 25 billion, the central bank makes a profit of all that interest and guess who they give the money to. It was the greatest trick ever pulled. Now of course Ireland has promised to put equivalent bonds on the market in 500 million chunks over time. Then they will have to be paid for. But for as long at it lasts it is free money.
Money exists not by nature but by law - and if you law hails from Frankfurt your just as fecked.
 

Spanner Island

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STFU, you left-wing, money-tree loving kn0b. You have been repeatedly told by certain posters around here, that the cost of bailing out the banks has been negligible and that having banking debt written off would have no impact on our budgetary difficulties.

Get with the programme.
Compared to the €12 billion+ current budget deficit we're continuing to pile on top of all our debt every year this (€1.6bn) is peanuts.

Obscene no doubt... and not our debt...

But since the eFFing traitors and the EU/ECB foisted it on us (€64 billion or so), we've more than added the same amount and more to our overall debts via the current budget deficit...

Ireland is f***ed...

Don't believe the hype about 'recovery' cos it's largely bullsh!t...

Yes the banking debts should be removed and written off but even if they were Ireland would still be f***ed.

Strange but understandable how people just don't seem to want to know about it and instead choose to listen to the horsesh!t that emanates from the likes of SF and lefties generally and even the Govt to a lesser extent...
 

Fr.Ted Crilly

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Compared to the €12 billion+ current budget deficit we're continuing to pile on top of all our debt every year this (€1.6bn) is peanuts.

Obscene no doubt... and not our debt...

But since the eFFing traitors and the EU/ECB foisted it on us (€64 billion or so), we've more than added the same amount and more to our overall debts via the current budget deficit...

Ireland is f***ed...

Don't believe the hype about 'recovery' cos it's largely bullsh!t...

Yes the banking debts should be removed and written off but even if they were Ireland would still be f***ed.

Strange but understandable how people just don't seem to want to know about it and instead choose to listen to the horsesh!t that emanates from the likes of SF and lefties generally and even the Govt to a lesser extent...

Our deficit isn't €12 billion.

According to the Exchequer, the deficit in the year ending in March is €2.3 billion.
 

ShoutingIsLeadership

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Compared to the €12 billion+ current budget deficit we're continuing to pile on top of all our debt every year this (€1.6bn) is peanuts.

Obscene no doubt... and not our debt...

But since the eFFing traitors and the EU/ECB foisted it on us (€64 billion or so), we've more than added the same amount and more to our overall debts via the current budget deficit...

Ireland is f***ed...

Don't believe the hype about 'recovery' cos it's largely bullsh!t...

Yes the banking debts should be removed and written off but even if they were Ireland would still be f***ed.

Strange but understandable how people just don't seem to want to know about it and instead choose to listen to the horsesh!t that emanates from the likes of SF and lefties generally and even the Govt to a lesser extent...
12?
 

beazlebottom

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Jesus .... still can you imagine how much worse it would have been if it was Frankfurts way instead of Labours way ?
Yes, were we not indeed so lucky tho have that Champion of the Irish people, Gimmemore, banging the drum for Ireland and undoing the Treacherous sellout of the Irish people by the Drunk and the Dead Fella.
 

Spanner Island

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Our deficit isn't €12 billion.

According to the Exchequer, the deficit in the year ending in March is €2.3 billion.
If we're continuing to borrow ca. €12 billion per year just to keep things as they are (albeit with continuing cuts) that's money which has to be repaid with interest added on top.

I assume we're not borrowing that money for the hell of it and that if we didn't need to borrow it we wouldn't.

No amount of cherry picking the numbers or interpretation of the numbers changes this.
 


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