Ireland has just guaranteed bank deposits to the tune of 400 Billion Euro - almost 3 times our annual output(GDP). It is clear we couldn't honour those guarantees if they were all called in.
Has the Government just mortgaged our lives to bail-out the banks? Is it time to stockpile food? Vote McCain for war without gain
It is clear we couldn't honour those guarantees if they were all called in.
All called in?
The deposits are only in doubt if mortgagees can't make the payments.Then you get a foreclosure/repossession, and - possibly - a shortfall.
It is only to the extent that there is a shortfall that the guarantee will get called in, and even then only after all remaining Bank equity (if any) is eroded.
So, in fact, I think the taxpayers' exposure is way short of the apocalyptic figures bandied about.
Of course, I think there's another way of doing it - a form of Debt/Equity swap - but everyone here knows that already. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Ireland has just guaranteed bank deposits to the tune of over 400 Billion Euro - almost 3 times our annual output (GDP). It is clear we couldn't honour those guarantees if there were major defaults.
Has the Government just mortgaged our lives to bail-out the banks? What if WE go bust trying to bail-out the banks? Where is our equity particaption in the Banks we have rescued? Indeed, where is the equity? Vote McCain for war without gain
Everybody knows the underlying asset (such as a house) disappears poof when the financial instrument (such as the mortgage) goes sour. This leads to the unsettling experience of people waking up in the morning only to find their neighbor's house - and the neighbors - have disappeared overnight.
You might say the value of, say, France, is large enough to cover the debt of French banks - is that true of Iceland ? Un roi sans divertissement est un homme plein de misères
You might say the value of, say, France, is large enough to cover the debt of French banks - is that true of Iceland ?
Yes.
;-)
I mean ...
[Write and then delete long, convoluted, argument.]
Look, valuation leading to a judgement of the Wealth of Iceland utterly depends on the criteria one brings to the process. Is the Icelandic culture worth anything? The fishing grounds are worth something but that 'something' depends on the time horizon used in the Net Present Value calculations. What about the Value of the untapped hydro, wind, and thermo energy potential? And so on until boredom sets in.
In my opinion the "Wealth" of Iceland greatly exceeds the mere monetary debts contracted by a small number of Icelanders who used OPM to play financial games.
Look, valuation leading to a judgement of the Wealth of Iceland utterly depends on the criteria one brings to the process.
And not just Iceland.
Which is why property is going 'poof' - there's a little bit of a problem with insurance on loans guaranteed on property which is crashing in value. The property doesn't need to go 'poof' - it just needs to make a massive loss. Which it's well on its way towards.
There will still be some residual value, but like every other market over-reaction, momentum becomes more important than reality. Some people will still want homes, but how much is an empty foreclosed house worth if no one can get a loan for it?
Value isn't created by reality but by confidence and mutual trust in ability to pay. When trust disappears, value goes with it, even when the real economy still has real things for sale.
The rest is (creative) accounting.
So far the "creative accounting" has been on the financier's side. There isn't any reason it cannot be switched to the consumer's side.
...debts contracted by a small number of Icelanders who used OPM to play financial games.
Some of the 20 have in all probability been acting as nominees or agents for Russian money of varying degrees of cleanliness.
Norway is well aware of that, which is why they have been circumspect about exactly what form any assistance will take. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Dick "It Wasn't My Fault" Fuld, the CEO of bankrupt investment bank Lehman Brothers, (seen here being heckled after testifying on Capitol Hill) was apparently punched in the face while working out in Lehman gym on the Sunday following the bankruptcy, according to CNBC's Vicki Ward.
I think the fact that Ireland is memeber of the Eurozone is clearly an advantage right now. Otherwise the Irish currency would have hugely plummeted. As Ireland would have lots of debt in foreign currency, the Irish economy would be in serious trouble.
If we are lucky the Irish will see 'Europe' more positively after the Euro saved them an even deeper crisis. Der Amerikaner ist die Orchidee unter den MenschenVolker Pispers
In addition, If you have savings I suggest opening termed accounts in several insured depository institutions of several EMU countries (preferably without capital connections, preferably the bigger countries with larger guarantees, France having the largest one since a while - caution: some, like ING "France", are not insured in France, because it doesn't have a registered french bank subsidiary, it's all operating straight from NL including retail and web).
If all goes well, the cost is only the inconvenience of doing business further from home. If things go crazy, you are insured against monetary chaos in Ireland.
Actually, deposit outflow to the continent are one thing to watch: it will be an indicator of the level of trust that the wealthy retain in the government. Pierre
This is like the East Asian crisis of 1997, only now it's affecting OECD countries. A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
