Is Defaulting a real option for Ireland?

Ethan Edwards

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I am hearing people around me, who before this mess, were part of the "Ah sure it will grand" or "What can the little man really do about all this" saying with increasing numbers "Why don't we just default" so my question Is defaulting really an option? that we as a people could do or afford to do.

1. What would be the consequences? (For the Irish people not the b/holders, bankers).
2. What kind of future could we expect? Would we be ostracized by Europe?
3. How would it affect businesses in this Country?

If what I am reading is correct, Portugal is the next target for the markets then Spain and then Italy or Hungary meanwhile we have signed a repayment contract with the IMF/ECB to pay back a truck load of money each year for God knows how long. I know I am not an economist and could very well be missing some glaring fact but at some point commonsense must kick in and the Irish people cannot be expected to look after everybody that gambled on Irish banks. It is like the advertisement says "The value of shares can rise as well as fall"
To those who know a bit more on this subject please share.
 


noworries

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Have a look at the standard of living and the quality of life in Albania and
then you can answer the question yourself
 

johnfás

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Some form of default, whether it is couched as a withdrawl of the bank guarantee or however else, is an inevitability.
 

Sync

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There are specific threads on this on the front page from both Bloomberg, David MCWilliams and Zerohedge all offering different suggestions on the default.
 

myksav

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Then merge them all, synch.
 

TradCat

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Another option would be for the ECB to print enough money to pay all the debts of all the banks and governments in Europe.

Of course that may lead to inflation. So once all the debts are paid there is an orderly unwinding of the euro and everybody starts again with their own currency, debt free and we agree never to mention the whole business again.
 

CptSternn

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Look at Argentina in early 2000.

Argentine economic crisis (1999

They were in the same boat - huge sovereign debt, huge banking crisis. They chose to let the banks fail and the government did not back the debt. At the time the media was saying they had to pay back creditors, else they would end up a third world country where no one would loan them money.

Look at them today - they are doing very well and the economy is booming. The whole bogeyman they said would come if they didn't back the banks never showed, people still invested because a nations sovereign debt is NOT the same as the bank debt, but if FF have their way they will force our country to ABSORB the bank debt and make it part of the sovereign debt...for what?

Look to Argentina to see there is an alternative.
 

eoghanacht

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Have a look at the standard of living and the quality of life in Albania and
then you can answer the question yourself
and what do you think 12 billion in austerity cuts is going to turn us into? Eutopia?
 

Libero

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and what do you think 12 billion in austerity cuts is going to turn us into? Eutopia?
Are you forgetting the annual interest payments on drawing down the loan facilities? Depending on how much is drawn down (and that will be largely a consequence of banking sector losses), this annual cost could be crippling in terms of the state’s ability to provide even basic services and transfer payments, nevermind engage in capital spending. Living standards will drop significantly, even if the economy is producing relatively healthy GDP growth.

It’s like we’re back in September 2008. The establishment has come up with (or had delivered to it) one single option (the bank guarantee then, the “bailout” now). This is presented as the only game in town (see the breathless Indo editorial today), and we’re warned of the immediate and terrible consequences that will result from going any other way, with heavy emphasis on the damage to everyday life from having the banking system collapse and the state run out of cash.

You’d think that after all we’ve been through in the last two years, we’d be a bit more reticent about that sort of deal.

But no. With a couple of noisy exceptions, the consensus in Irish public life is that disruption to banks and commerce and public sector pay must be avoided at all costs. Literally, all costs. There is no cost-benefit analysis, just a quick and instinctive calculation that significant short-term disruption is unacceptable. Presumably, long-term impoverishment will be manageable.

Before the end of last September, Ireland had the threat of restructuring bank sector debts, allowing them to fall on the bondholders in Europe – and using that threat to force an overall restructuring of Irish debts, securing living standards here. But that threat would only be effective if made with credibility, and the ECB must have known that Ireland’s political class hadn’t the stomach for short-term disruption.

Our short-term abhorrence for disruption is ensuring our long-term impoverishment, thanks to the burden of debt taken on to avoid the disruption.
 

Congalltee

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Let's simplifiy this (overly - using rough numbers of €54bn nama/banking debts, existing sovereign debt €90bn and €80bn in new "bailout").

My income is €35k a year (it used to be €60k). My outgoings on my childrens's education is €10k, on household health is €15k and looking after my old mother and unemployed eldest son is €22K, I spend another €10k on general spending (€57k in total). I currently owe €90k from debts I accrued myself.

My sister with a gambling problem owes between €54k to €80k (we can't be sure yet) for reckless spending. Two years ago, I acted as a guarantor on those loans and got an interest in her property (impossible to know what it will be worth). Since then, a new bank bought out some of the other loans and has put in about €130,000, but they will lend me €80k to pay some of that debt back, as they know that they may not see all of it again, but they don't want to lend anymore.

I have spoken to my lawyer, who says that using a legal loophole, I can default on all of my loans but there will be very serious consequences to each ption:.
a) if I default on all, I will never get money again, my household will collapse, I lose will lose all my friends, I will lose trade and be pretty much finished.
b) If it just agree to pay my €90K, I will lose all of my friends and will have to cut my spending by €22,000 immediately and hope for the best that my bankers move on to bigger fish.
c) if I agree to pay my €90k, but admit there is no way either I or my sister can pay the other loans back in full, agree to pay as much as is reasonably possible at a low interest rate of say 3% and invite our lenders to state what the least they will take without shunning us forever: we don't know the consequences.
or
d) I agree to borrow a further €80to100K, on top of my €90k, and commit to the unknown bank debts, but agree to cut my spending by €10k and increase my income by €5k over 4 years, and pretend to the world that the numbers add up (and the whole world smiles with me). Except, I'm not sure what will happen when someone points out that the formula:

[(90+54+80)/forever + 0.05(90+54+80)] - [(35+5) - (57-10)] = does not compute.
 

Cassandra Syndrome

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Default and Ireland should go bankrupt. That is the only solution for the Irish people. Simple as. Jim Rogers talked about this yesterday on Russia Today.
 

Cassandra Syndrome

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Have a look at the standard of living and the quality of life in Albania and
then you can answer the question yourself
In the 1780s a country called the United States of America defaulted and went bankrupt. How did it do afterwards?
 

vanla sighs

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Yes, we can default, we have that power, it's in our own hands. This piece from Bloomberg suggests we default David McWilliams said that when Argentina defaulted they were on the road to recovery within 4 months......4 months! Not 4 years or 4 decades....4 months! We can do it and you know what if we did, if we did choose to go down that road, I'd be ready for sacrifices - moreso than I'd be ready for sacrifices under the boot of the EU/ECB/IMFF (that last F is intentional :))

We can f*ck FF out of it, immediate election, default and tell the EU/ECB/IMFF where to go - otherwise they are going to destroy our country and our society, we need to get up off our knees.
 

A view from England

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Yes, we can default, we have that power, it's in our own hands. This piece from Bloomberg suggests we default David McWilliams said that when Argentina defaulted they were on the road to recovery within 4 months......4 months! Not 4 years or 4 decades....4 months! We can do it and you know what if we did, if we did choose to go down that road, I'd be ready for sacrifices - moreso than I'd be ready for sacrifices under the boot of the EU/ECB/IMFF (that last F is intentional :))

We can f*ck FF out of it, immediate election, default and tell the EU/ECB/IMFF where to go - otherwise they are going to destroy our country and our society, we need to get up off our knees.
Where will you get money from to run the country?
 

Ethan Edwards

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road, I'd be ready for sacrifices - moreso than I'd be ready for sacrifices under the boot of the EU/ECB/IMFF (that last F is intentional :))
That is how I feel about it, but as has just been posted how do we make the books balance by next June when our money reserves run out, if we are taking in €35B a year and spending €50B just to keep things ticking over that would mean an austerity budget of €15B, can a Country or its people take such a pill.
 

Doodah

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Where will you get money from to run the country?
From you chaps of course... :D
Thanks very much. ..*Tips hat*
Could you guys loan us the Royal Mint so we can start printing a few Punts as well?
Thanks very much.
To be sure to be sure, Boss. ..*Tips hat again*
 


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