Not Greece, Not Iceland, and now Not Ireland neither.

He3

Well-known member
Joined
Oct 1, 2008
Messages
17,077
When asked whether Iceland was right to let its banks fail, he said while it’s too early to say, the country couldn’t have afforded to take over all the lenders’ liabilities. “In some sense I think yes, it was. We stumbled down the right thing,” - Iceland's Central bank Governor Mar Gudmundsson.

Claiming to be better than someone else is not to be encouraged. That lesson was lost on our government when it was inclined to stress how Ireland was not Greece, and that unless we did what they recommended, we would become Iceland, which they assured us would be a fate worse than debt. Now that the IMF/EU runs our affairs via a shadow government in Leinster House/Government Buildings, arguably Ireland is not even Ireland.

On the perils of pointing the finger, see how places changed from June to December -

June 2010: Ireland Loses Iceland Stigma as Euro Ensures No Return to Past
“The Irish are lucky that they’re in the EU and the euro zone, otherwise they’d have been Iceland Mark II,” says Buiter, now a professor at the London School of Economics.

Ireland Loses Iceland Stigma as Euro Ensures No Return to Past - Bloomberg

December 2010:Iceland Was Right on Bondholders, Gudmundsson Says
Iceland was right not to bail out bondholders in the country’s banks and wasn’t ever in a position to support creditors because of the size of the debt, central bank Governor Mar Gudmundsson said.

“Bondholders should not rely on the government stepping in and bailing them out,” Gudmundsson said after delivering a speech at the Goethe University of Frankfurt’s House of Finance yesterday evening. “They should do their due diligence.”

Creditors are still trying to recoup $85 billion after Kaupthing Bank hf, Landsbanki Islands hf and Glitnir Bank hf failed more than two years ago. Iceland’s decision to push the cost of its banking failure onto bondholders instead of taxpayers is in contrast to Ireland’s agreement to protect senior bondholders from losses as part of its 85 billion-euro ($111 billion) rescue package.

“I think the Irish are accepting that they were probably too fast in guaranteeing the whole liabilities of banks,” Gudmundsson said. “Now this is turning out to be a big burden because the assets of these banks turned out to be much worse than they thought.”


http://www.bloomberg.com/news/2010-12-03/iceland-was-right-not-to-bail-out-bondholders-central-bank-governor-says.html

As for Buiter, well his thinking has moved on -

in our view, the consolidated Irish sovereign and Irish domestic financial system is de facto insolvent. The Irish sovereign cannot from its own resources ‘bail out’ the banks and make its own creditors whole.

http://www.politics.ie/economy/144652-trading-recklessly-irelands-consolidated-financial-system-insolvent-buiter.html

Who knows where we will not be in the Spring?
 
Last edited:


Gadfly

Well-known member
Joined
Nov 14, 2007
Messages
354
The game is up, the verdict has come in: the maximalist guarantee was a wrong call.

Because of it, we are not only in the hands of the IMF - we may not be able to bear the conditions of the deal imposed on us, in which case default follows.

The truth of the matter is that there was no alternative on 29 September 2008. There was no alternative to excluding Anglo and Nationwide from the guarantee. Just as foreseen in the preparatory work - until the political leadership changed this.

How much have these two swallowed up between them, since then? €35 bn, and more to come? Basically the difference between a rigorous austerity programme and a strategy which has brought us to bailout stage, with a prospect of default down the road.

If one had conducted due diligence at the time - and in the months following the Bear Stearns collapse in March - what plausible estimate could have been made on the dimensions of Anglo's insolvency?

So what would have happened, had Anglo and Nationwide not been given a blank cheque?

I am open to correction on this, but there seems to be relatively little counterfactual analysis out there.

Would they have closed down immediately? Presumably. Would the bondholders, shareholders and major depositers gone on the warpath? Surely. As they did on Iceland. We would have had political pressure, on the lines of UK pressure on Iceland on behalf of burned depositers, and we would have had massive lawsuits centred on the state's responsibilities as a regulator. (This last would have been interesting to see).

Would the turmoil have spilled over to other banks? Obviously. And yet the other banks would have had a credible guarantee (as opposed to an incredible one) behind them.

And the government would immediately have been in acrimonious negotiations with the EU and ECB on damage limitation.

Possible too that the government would have fallen, as it did in Iceland. And this might well have been a factor in the decision.

Yes, there would have been a sharp shock to the entire economy. Not on the Icelandic scale, but beyond anything we have experienced before.

But there was no alternative.
 
Last edited:

A view from England

Well-known member
Joined
Apr 14, 2010
Messages
2,056
The whispers are getting louder....
BBC - Stephanomics: If Germany left the eurozone
Will it happen? I truely hope so. Germany would keep it's economy on track after an initial hiccup, Ireland and the other PIIGS would benefit from a currency devaluation and/or then be able to withdraw from the Euro in a far better position and best of all, the eurofacist dream would be over. Winners all round!
 

He3

Well-known member
Joined
Oct 1, 2008
Messages
17,077
The game is up, the verdict has come in: the maximalist guarantee was a wrong call.

Because of it, we are not only in the hands of the IMF - we may not be able to bear the conditions of the deal imposed on us, in which case default follows.

The truth of the matter is that there was no alternative on 29 September 2008. There was no alternative to excluding Anglo and Nationwide from the guarantee. Just as foreseen in the preparatory work - until the political leadership changed this.

How much have these two swallowed up between them, since then? €35 bn, and more to come? Basically the difference between a rigorous austerity programme and a strategy which has brought us to bailout stage, with a prospect of default down the road.

If one had conducted due diligence at the time - and in the months following the Bear Stearns collapse in March - what plausible estimate could have been made on the dimensions of Anglo's insolvency?

So what would have happened, had Anglo and Nationwide not been given a blank cheque?

I am open to correction on this, but there seems to be relatively little counterfactual analysis out there.

Would they have closed down immediately? Presumably. Would the bondholders, shareholders and major depositers gone on the warpath? Surely. As they did on Iceland. We would have had political pressure, on the lines of UK pressure on Iceland on behalf of burned depositers, and we would have had massive lawsuits centred on the state's responsibilities as a regulator. (This last would have been interesting to see).

Would the turmoil have spilled over to other banks? Obviously. And yet the other banks would have had a credible guarantee (as opposed to an incredible one) behind them.

And the government would immediately have been in acrimonious negotiations with the EU and ECB on damage limitation.

Possible too that the government would have fallen, as it did in Iceland. And this might well have been a factor in the decision.

Yes, there would have been a sharp shock to the entire economy. Not on the Icelandic scale, but beyond anything we have experienced before.

But there was no alternative.
Well observed.

Leadership may be technically the correct word.
 

Social Conscience

Well-known member
Joined
Oct 27, 2010
Messages
1,273
Will it happen? I truely hope so. Germany would keep it's economy on track after an initial hiccup, Ireland and the other PIIGS would benefit from a currency devaluation and/or then be able to withdraw from the Euro in a far better position and best of all, the eurofacist dream would be over. Winners all round!
So Germany pulls out of the Euro, then the euro is dead so back to our own currency we go. What follows is a significant devaluation...........you say winners all round - how about the thousands of Irish mortgages in the now dead euro currency? Do you not think that borrowers would then in fact actually owe more money than they currently do?
 

He3

Well-known member
Joined
Oct 1, 2008
Messages
17,077
From Search and Rescue to Pulling down the Shutters, all in a week

When the outcome shocks even Michael Casey, formerly on the IMF board, you know the game is up. First his upbeat comments from last Friday:

The thought of the IMF involving itself in Ireland’s economic affairs fills many with dread, but such fears are misguided.
...
The inclusion of the EU and the ECB in the arrangement gives rise to additional resources but also more drawn out negotiations. If it is the case that the ECB wants to throttle back on lending directly to Irish banks and to place the debt burden on the Irish Government, and hence taxpayers, this could be a contentious point. It is possible the IMF would side with the Irish government in that respect. The key to all of this is that Ireland puts forward a negotiating team of tough,expert negotiators.

Search and Rescue

Today, just one week later, Michael Casey realises the people who got us into this mess are only capable of getting us deeper in:

Being such good Europeans, we were easy meat. We had been cajoled to vote for the Lisbon Treaty; we had promised faithfully to deliver on the fiscal targets laid down by Brussels; we had never massaged our borrowing numbers. Of more immediate importance, our banks had already paid out something like €55 billion to senior bondholders at the urging of the ECB.

The recent negotiations gave no easement regarding future payments to senior bondholders because the ECB is clearly trying to protect French and German banks and prevent contagion. One might have expected that, in return for this, the ECB might have written off some of its own extensive lending to Irish banks or even taken over part of the Irish Government guarantee of €440 billion. Nothing of this nature was forthcoming. Whether it was even discussed, we will never know.

Irish taxpayers (and consumers, always ignored by governments and central banks) remain a soft touch. They will bear the debt burden for decades ahead.

The promise to downsize and restructure our banks is, of course, desirable in its own right, but it will also be of major benefit to the ECB. The more assets our institutions can sell off, the less borrowing (from the ECB) will be needed. That also explains why the National Asset Management Agency (Nama) will have to take another €16 billion of property-related assets from the major banks. This is part of the plan even though Michael Somers and others claim that Nama has so undermined the balance sheets of banks that they are still unable to lend to small- and medium-sized businesses. Nama in short has become part of the problem, not the solution. Not even the law of unintended consequences can explain this mutation.

The ECB and EU clearly got what they wanted from these negotiations but it may not be enough to deflect the markets from attacking the euro zone.

Are shutters to be pulled down on Irish banks?
 
Last edited:

MPB

Well-known member
Joined
Nov 27, 2009
Messages
4,455
Michael Casey, a former IMF board member, sees the ground disappear beneath our feet, just a week after he had been hopeful. First his comments from last Friday:

The thought of the IMF involving itself in Ireland’s economic affairs fills many with dread, but such fears are misguided.
...
The inclusion of the EU and the ECB in the arrangement gives rise to additional resources but also more drawn out negotiations. If it is the case that the ECB wants to throttle back on lending directly to Irish banks and to place the debt burden on the Irish Government, and hence taxpayers, this could be a contentious point. It is possible the IMF would side with the Irish government in that respect. The key to all of this is that Ireland puts forward a negotiating team of tough,expert negotiators.

Search and Rescue

Today, just one week later, Michael Casey realises the people who got us into this mess are only capable of making things worse, not better:

Being such good Europeans, we were easy meat. We had been cajoled to vote for the Lisbon Treaty; we had promised faithfully to deliver on the fiscal targets laid down by Brussels; we had never massaged our borrowing numbers. Of more immediate importance, our banks had already paid out something like €55 billion to senior bondholders at the urging of the ECB.

The recent negotiations gave no easement regarding future payments to senior bondholders because the ECB is clearly trying to protect French and German banks and prevent contagion. One might have expected that, in return for this, the ECB might have written off some of its own extensive lending to Irish banks or even taken over part of the Irish Government guarantee of €440 billion. Nothing of this nature was forthcoming. Whether it was even discussed, we will never know.

Irish taxpayers (and consumers, always ignored by governments and central banks) remain a soft touch. They will bear the debt burden for decades ahead.

The promise to downsize and restructure our banks is, of course, desirable in its own right, but it will also be of major benefit to the ECB. The more assets our institutions can sell off, the less borrowing (from the ECB) will be needed. That also explains why the National Asset Management Agency (Nama) will have to take another €16 billion of property-related assets from the major banks. This is part of the plan even though Michael Somers and others claim that Nama has so undermined the balance sheets of banks that they are still unable to lend to small- and medium-sized businesses. Nama in short has become part of the problem, not the solution. Not even the law of unintended consequences can explain this mutation.

The ECB and EU clearly got what they wanted from these negotiations but it may not be enough to deflect the markets from attacking the euro zone.

Are shutters to be pulled down on Irish banks?
The EU/ECB might think it has got what it wants from Ireland, in asking us to bear the burden of Bank reparations, but they are wholly mis guided.

We will never repay these loans. Not only can we not afford to, but we have no intention.

Already you can see a swing to far left parties. The reason for this swing is because of their promise to refuse to honour this deal and refuse to repay senior bondholders in private Banks.

This swing to the left will see the inevitable counter measure of a swing to the right. Leaving the centrist parties swinging in the wind.

You would think the Germans would have remembered this. After all it was they that gave us the template.
 
Joined
Jul 24, 2008
Messages
48
Yes, this situation is uncannily similar to that in Germany post the summer of 1931 financial crash. Rampant austerity was tried by the Bruening Government, in an attempt to "fulfill" the Young and Dawes Plans for reparations, and succeeded only in wrecking the economy and creating the circumstances that saw Hitler come to power. Then, Germany could not pay reparations as it had borrowed too much from the US in the good times of the 1920s and had no credit lines left in the crash; similarly, Ireland borrowed too much in the good times and thus has no credit left in the crash. Hitler was popular precisely because he utterly repudiated reparations; and so will be the Irish party that repudiates this debt enslavement deal.

Take note, Fine Gael.
 

Padraigin

Well-known member
Joined
Sep 22, 2006
Messages
628
The EU/ECB might think it has got what it wants from Ireland, in asking us to bear the burden of Bank reparations, but they are wholly mis guided.

We will never repay these loans. Not only can we not afford to, but we have no intention.

Already you can see a swing to far left parties. The reason for this swing is because of their promise to refuse to honour this deal and refuse to repay senior bondholders in private Banks.

This swing to the left will see the inevitable counter measure of a swing to the right. Leaving the centrist parties swinging in the wind.

You would think the Germans would have remembered this. After all it was they that gave us the template.


Ireland cannot afford weak leaders and weak leadership. Ireland cannot afford a government that kneels and submits to foreign masters and foreign interests. The current government needs to be brought down on Tuesday and budget defeated.

The next government has only one immediate task - get Ireland out of bondage to foreign banks. Do whatever it takes. Plan for a default, but give the ultimatum first - either the EU/IMF discharge Ireland from the bank debt or Ireland defaults on the whole thing and keeps its tax revenues wholly for the Irish people. And then do it.

Once free of the debt, Ireland has to live within its means. The government will get no more loans from the international banks. However, it will not have to service the old debt, which means that the government may actually have more money at its disposal than it did before default. The budget may not need much cutting. However, the Irish economy needs to get some serious attention, as Ireland will have to prove to the world again that it knows how to manage its finances.

In other words, we need SF to be the next government if they are the only ones prepared to tell the EU/IMF to get lost, that Ireland will not submit to bondage to European banks, that Ireland does not intend to destroy itself merely to keep reckless bondholders from experiencing discomfort.

However, SF may not be the ideal party to grow the economy. Or, rather, they may need help as economics is not their strong suit. However, right now, we need their backbone,
 

MPB

Well-known member
Joined
Nov 27, 2009
Messages
4,455
Ireland cannot afford weak leaders and weak leadership. Ireland cannot afford a government that kneels and submits to foreign masters and foreign interests. The current government needs to be brought down on Tuesday and budget defeated.

The next government has only one immediate task - get Ireland out of bondage to foreign banks. Do whatever it takes. Plan for a default, but give the ultimatum first - either the EU/IMF discharge Ireland from the bank debt or Ireland defaults on the whole thing and keeps its tax revenues wholly for the Irish people. And then do it.

Once free of the debt, Ireland has to live within its means. The government will get no more loans from the international banks. However, it will not have to service the old debt, which means that the government may actually have more money at its disposal than it did before default. The budget may not need much cutting. However, the Irish economy needs to get some serious attention, as Ireland will have to prove to the world again that it knows how to manage its finances.

In other words, we need SF to be the next government if they are the only ones prepared to tell the EU/IMF to get lost, that Ireland will not submit to bondage to European banks, that Ireland does not intend to destroy itself merely to keep reckless bondholders from experiencing discomfort.

However, SF may not be the ideal party to grow the economy. Or, rather, they may need help as economics is not their strong suit. However, right now, we need their backbone,
Yep I do not trust SF with the economy but if we are to burden ourselves with Bank debt and a penal borrowing rate, I don,t hold out much hope for anybody rectifying the Economy.

Better to make sure we do not have the burden of the debt first and worry about the rest later.
 

Padraigin

Well-known member
Joined
Sep 22, 2006
Messages
628
Yep I do not trust SF with the economy but if we are to burden ourselves with Bank debt and a penal borrowing rate, I don,t hold out much hope for anybody rectifying the Economy.

Better to make sure we do not have the burden of the debt first and worry about the rest later.

Exactly. We need SF as the next government, because they are the only ones ready, willing, and able to kill the Debt Enslavement Deal.

Everything else is a matter to be dealt with after that.

Saving the country comes first.
 

Neilob

Well-known member
Joined
Dec 2, 2010
Messages
1,170
The economic fundamentals of Ireland and Iceland are similar in some ways. They are both small open economies and export orientated. The fishing industry provides 40% of export earnings and more than 12% of GDP, and it employs 7% of the work force. Like us, much of Iceland's recent economic performance came on the back of a boom in domestic demand following a quick expansion of the country's financial sector. As a result when the banking crisis came there was huge international exposure by the wholesale banking markets to Iceland, and the ratio of Icelandic bank loans came to more than 10 times the country's GDP.

All sounds very familiar, but the outcome was tragically different. In 2008 the government let the three main banks collapse. So how did they fare? Well after loosing the confidence of the money markets the IMF stepped in and loaned them $10 billion. This was used to stabilise their currency, and also (very contraversially) to back government guarantees for foreign deposits in Icelandic banks. Since the bank collapse GDP has stood at zero, after declining 6.6% in 2009. Per capita GDP dropped from $42,600 in 2008 to $39,400 in 2009. National revenue dropped from $6.252 in 2008 to $5.144 billion in 2009. Unemployment increased in a similar period to 8%. Three new banks were established and took over the domestic assets of the collapsed banks; the State owning a monopoly in one and the other two owned by foreign interests. The Icelandic State is currently being sued by the Dutch and British Governments for losses sustained in foreign deposits. Despite this their cash reserves remain untouched standing at $3.57 billion in 2007 and $3.883 billion in 2009.

That all sounds pretty ok all things considered, but let's look at the bad news for you and me in a similar situation for Ireland. Public debt rose to 113.9% of GDP in 2009, rising from 68.8% of GDP in 2008. True enough, we're heading in the same direction, but look at what is happening to the economy: inflation currently runs at 12% - double Ireland's at the peak of the Celtic Tiger. Get this, domestic interest rates stand at a whopping 18.99% - imagine servicing a mortgage on this!!. The exchange rate on currency has risen from 62.982 on the dollar in 2005 to 128.417 in 2009 - ouch, imagine if your mortgage doubled. The market value of publically traded shares dropped astonishingly from $40.56 billion in 2007 to $1.67 billion in 2009 - oh no where's my pension gone? Industrial growth production was minus 10% in 2009 - ours is exceptionally healthy. The state current account balance is 110th in the world, which is dismal, dropping from $3.572 billion in 2007 to $440 million in 2009. Fish and fish products now account for 40% of exports, yet 70% of the population work in the service industry - someone has got to be double jobbing on the oul trawlers - imagine if you had to go to Killybegs every weekend. They are the 134th most indebted country in the world, up there with an average African cleptocracy.

Default is a pretty drastic step and we had all be ready for a very significant drop in living standards and to loose our shirts. But then again, nobody died and they are punishing their dodgey politicians. Ours are still in power:mad:
 
Last edited:

Neilob

Well-known member
Joined
Dec 2, 2010
Messages
1,170
Yes, this situation is uncannily similar to that in Germany post the summer of 1931 financial crash. Rampant austerity was tried by the Bruening Government, in an attempt to "fulfill" the Young and Dawes Plans for reparations, and succeeded only in wrecking the economy and creating the circumstances that saw Hitler come to power. Then, Germany could not pay reparations as it had borrowed too much from the US in the good times of the 1920s and had no credit lines left in the crash; similarly, Ireland borrowed too much in the good times and thus has no credit left in the crash. Hitler was popular precisely because he utterly repudiated reparations; and so will be the Irish party that repudiates this debt enslavement deal.

Take note, Fine Gael.

This is exactly why our democracy is now under threat. The paralells between the Wall Street Crash and our international financial crisis are astonishing. It took two to three years for the fall out to land, with the exit of Britain from the Gold Standard and international default on debt by the mid 1930s. The consequence of economic despair was Hitler and the Nazis.

We have to be very careful about what we say about our democracy. Reform it by all means, but preserve it at all costs. It is inevitable that we will default eventually, but it would be much better to wait until the bigger boys begin to wobble before we destroy what remains of our international reputation. Ireland is the type of country that must follow where others lead. We're too small and two open to decide our own economic destiny.
 

He3

Well-known member
Joined
Oct 1, 2008
Messages
17,077
The economic fundamentals of Ireland and Iceland are similar in some ways. They are both small open economies and export orientated. The fishing industry provides 40% of export earnings and more than 12% of GDP, and it employs 7% of the work force. Like us, much of Iceland's recent economic performance came on the back of a boom in domestic demand following a quick expansion of the country's financial sector. As a result when the banking crisis came there was huge international exposure by the wholesale banking markets to Iceland, and the ratio of Icelandic bank loans came to more than 10 times the country's GDP.

All sounds very familiar, but the outcome was tragically different. In 2008 the government let the three main banks collapse. So how did they fare? Well after loosing the confidence of the money markets the IMF stepped in and loaned them $10 billion. This was used to stabilise their currency, and also (very contraversially) to back government guarantees for foreign deposits in Icelandic banks. Since the bank collapse GDP has stood at zero, after declining 6.6% in 2009. Per capita GDP dropped from $42,600 in 2008 to $39,400 in 2009. National revenue dropped from $6.252 in 2008 to $5.144 billion in 2009. Unemployment increased in a similar period to 8%. Three new banks were established and took over the domestic assets of the collapsed banks; the State owning a monopoly in one and the other two owned by foreign interests. The Icelandic State is currently being sued by the Dutch and British Governments for losses sustained in foreign deposits. Despite this their cash reserves remain untouched standing at $3.57 billion in 2007 and $3.883 billion in 2009.

That all sounds pretty ok all things considered, but let's look at the bad news for you and me in a similar situation for Ireland. Public debt rose to 113.9% of GDP in 2009, rising from 68.8% of GDP in 2008. True enough, we're heading in the same direction, but look at what is happening to the economy: inflation currently runs at 12% - double Ireland's at the peak of the Celtic Tiger. Get this, domestic interest rates stand at a whopping 18.99% - imagine servicing a mortgage on this!!. The exchange rate on currency has risen from 62.982 on the dollar in 2005 to 128.417 in 2009 - ouch, imagine if your mortgage doubled. The market value of publically traded shares dropped astonishingly from $40.56 billion in 2007 to $1.67 billion in 2009 - oh no where's my pension gone? Industrial growth production was minus 10% in 2009 - ours is exceptionally healthy. The state current account balance is 110th in the world, which is dismal, dropping from $3.572 billion in 2007 to $440 million in 2009. Fish and fish products now account for 40% of exports, yet 70% of the population work in the service industry - someone has got to be double jobbing on the oul trawlers - imagine if you had to go to Killybegs every weekend. They are the 134th most indebted country in the world, up there with an average African cleptocracy.

Default is a pretty drastic step and we had all be ready for a very significant drop in living standards and to loose our shirts. But then again, nobody died and they are punishing their dodgey politicians. Ours are still in power:mad:
Do you see any sign of planning for the apparently inevitable default?
 

He3

Well-known member
Joined
Oct 1, 2008
Messages
17,077
Yes, this situation is uncannily similar to that in Germany post the summer of 1931 financial crash. Rampant austerity was tried by the Bruening Government, in an attempt to "fulfill" the Young and Dawes Plans for reparations, and succeeded only in wrecking the economy and creating the circumstances that saw Hitler come to power. Then, Germany could not pay reparations as it had borrowed too much from the US in the good times of the 1920s and had no credit lines left in the crash; similarly, Ireland borrowed too much in the good times and thus has no credit left in the crash. Hitler was popular precisely because he utterly repudiated reparations; and so will be the Irish party that repudiates this debt enslavement deal.

Take note, Fine Gael.
Eichengreen's comparison between the reparations imposed on Germany after WW1 and the terms imposed on Ireland has moved the debate on into disturbing territory. Suddenly the old put-down about Godwin's Law doesn't apply.
 

MPB

Well-known member
Joined
Nov 27, 2009
Messages
4,455
This is exactly why our democracy is now under threat. The paralells between the Wall Street Crash and our international financial crisis are astonishing. It took two to three years for the fall out to land, with the exit of Britain from the Gold Standard and international default on debt by the mid 1930s. The consequence of economic despair was Hitler and the Nazis.

We have to be very careful about what we say about our democracy. Reform it by all means, but preserve it at all costs. It is inevitable that we will default eventually, but it would be much better to wait until the bigger boys begin to wobble before we destroy what remains of our international reputation. Ireland is the type of country that must follow where others lead. We're too small and two open to decide our own economic destiny.
I don,t disagree with the wait and see policy. Events will most likely come to our rescue, but we should nudge those events towards their inevitable conclusion at a faster pace, by drawing up Bank resolution legislation with retrospective legislation attached. We should also draw up plans to leave the euro.

This would concentrate minds and strengthen our bargaining position.

My only worry is, that the prolonged effects of austerity as a measure to subsidise Bank reparations, will lead to the rise of extreme left and right parties and might leave us without any options in the future.
 

Truth1

Member
Joined
Sep 25, 2010
Messages
88
The game is up, the verdict has come in: the maximalist guarantee was a wrong call.

Because of it, we are not only in the hands of the IMF - we may not be able to bear the conditions of the deal imposed on us, in which case default follows.

The truth of the matter is that there was no alternative on 29 September 2008. There was no alternative to excluding Anglo and Nationwide from the guarantee. Just as foreseen in the preparatory work - until the political leadership changed this.

How much have these two swallowed up between them, since then? €35 bn, and more to come? Basically the difference between a rigorous austerity programme and a strategy which has brought us to bailout stage, with a prospect of default down the road.

If one had conducted due diligence at the time - and in the months following the Bear Stearns collapse in March - what plausible estimate could have been made on the dimensions of Anglo's insolvency?

So what would have happened, had Anglo and Nationwide not been given a blank cheque?

I am open to correction on this, but there seems to be relatively little counterfactual analysis out there.

Would they have closed down immediately? Presumably. Would the bondholders, shareholders and major depositers gone on the warpath? Surely. As they did on Iceland. We would have had political pressure, on the lines of UK pressure on Iceland on behalf of burned depositers, and we would have had massive lawsuits centred on the state's responsibilities as a regulator. (This last would have been interesting to see).

Would the turmoil have spilled over to other banks? Obviously. And yet the other banks would have had a credible guarantee (as opposed to an incredible one) behind them.

And the government would immediately have been in acrimonious negotiations with the EU and ECB on damage limitation.

Possible too that the government would have fallen, as it did in Iceland. And this might well have been a factor in the decision.

Yes, there would have been a sharp shock to the entire economy. Not on the Icelandic scale, but beyond anything we have experienced before.

But there was no alternative.
Interesting commentary: - One issue which would not have arisen if Nationwide had not been included in the guarantee - Fingelton would not have recovered his immoral back holiday pay as Nationwide would have been in administration by the time of his claim- furthermore the liquidator/administrator for the "Friendly Society" would now be well on the way in a claim to recover loans and pension contributions to Fingelton and family. Where is Michael Fingelton at the moment incidentally?
 

He3

Well-known member
Joined
Oct 1, 2008
Messages
17,077
I don,t disagree with the wait and see policy. Events will most likely come to our rescue, but we should nudge those events towards their inevitable conclusion at a faster pace, by drawing up Bank resolution legislation with retrospective legislation attached. We should also draw up plans to leave the euro.

This would concentrate minds and strengthen our bargaining position.

My only worry is, that the prolonged effects of austerity as a measure to subsidise Bank reparations, will lead to the rise of extreme left and right parties and might leave us without any options in the future.
Supervising such a dramatic and critical sequence of complex events would indeed require great concentration.

Would it give renewed voice to the 'This is no time to be distracted by an election' chorus?
 

Padraigin

Well-known member
Joined
Sep 22, 2006
Messages
628
I don,t disagree with the wait and see policy. Events will most likely come to our rescue, but we should nudge those events towards their inevitable conclusion at a faster pace, by drawing up Bank resolution legislation with retrospective legislation attached. We should also draw up plans to leave the euro.

This would concentrate minds and strengthen our bargaining position.

My only worry is, that the prolonged effects of austerity as a measure to subsidise Bank reparations, will lead to the rise of extreme left and right parties and might leave us without any options in the future.

The way to drag things out a bit in order to do some serious planning and preparation is to kill the budget, collapse the government, force an election, which leaves the Debt Enslavement Deal is limbo. It can't go anywhere.

The next government will then have a freer hand in what to do. So long as the Debt Enslavement Deal is left hanging with its fate undetermined, it can be renegotiated, repudiated, or (gag) even accepted.

However, for that to happen, FF has to leave now, because these incompetent traitors still want to get their hands on all the money.

This cannot wait.
 


New Threads

Most Replies

Top