Bank guarantee likely to deal a crippling blow to the economy: Morgan Kelly

[kerrynorth]

As the economy collapses, so does the Government’s tax revenue. This year the Government will have to borrow about €20 billion – everything it spends on wages or on social welfare – or about 15 per cent of a falling national income.

With no chance that the hopelessly uncompetitive economy will recover in the next five years and little sign that the Government has any appetite for serious cuts in spending or increases in taxation, borrowing looks set to continue at around this level for the foreseeable future.

If this borrowing was the limit of the Government’s liabilities, Ireland would probably just about weather the storm in the bond markets. Unfortunately, an elephant is lurking in the corner in the form of the bank liability guarantee, and this looks increasingly certain to sink the economy.......................


For increasing numbers of ordinary people, the Irish economic miracle has turned out to be as worthwhile as a share in Bernard L Madoff Investments.

In return for working hard and paying their taxes, the lucky ones who keep their jobs can now look forward to pay cuts, negative equity and savage tax rises; while the unlucky ones face prolonged unemployment and losing their homes, their cars and everything for which they have worked.

If, on top of this, we suffer a sudden stop, people will see their pensions and Government spending slashed to pay off the gambling losses of Seán FitzPatrick and his pals. The Irish social fabric would certainly rip and unprecedented civil disorder ensue.

Bill Clinton’s feared enforcer James Carville once said that he would like to be reincarnated as the bond market, because that way you get to intimidate everyone.

Without decisive and intelligent Government action in the next few weeks, by the end of this year we will understand exactly what he meant.

Bank guarantee likely to deal a crippling blow to the economy - The Irish Times - Tue, Feb 17, 2009

[X-ray]

Can we set up a second Republic and not pay the bill?
Its so unEuropean to be only on the first incarnation of the state.
I have zero interest in whether the "international markets" like it. It they lent money to Irish Nationwide they deserve it.

[Dios]

Can we set up a second Republic and not pay the bill?
Its so unEuropean to be only on the first incarnation of the state.
I have zero interest in whether the "international markets" like it. It they lent money to Irish Nationwide they deserve it.

Downside: nobody would ever lend to the Irish government or banks again.

[Digout]

No suprise here, anybody with half a brain knew FF would balls this up, the same way as they have ballsed everything else they touched.

[libertarian-right]

This was a huge mistake for this country. We shall soon find out how stupid this decision really was. And your right, the interests were only for bankers and builders.

[lostexpectation]

this is very amusing,

(we're ok for now cos we havn't got too much debt)....

To understand why this view is too complacent, imagine that you are a bank manager and somebody that we will call Brian (not his real name) comes in looking for a loan.
Brian’s income is €30,000 and he would like to borrow €20,000 to cover living expenses. This sounds like a lot in these nervous times but, because Brian is not carrying much debt, you think you might lend to him.
However, Brian then lets it slip that, because his income is falling sharply, he will need to borrow at least as much each year for the foreseeable future. He also admits that, late one night and for what seemed like good reasons at the time, he somehow agreed to insure the gambling losses of some “banks”.
Brian has no idea how large these losses might be, but is starting to fear that they might be substantial. At this stage, you realise that Brian is on a trajectory into bankruptcy and show him the door.

[Digout]

Who was minister for finance when this bubble was being created?

[riker1969]

What was the alternative to the Bank Recapitalisation?? Im not sure Morgan Kelly has ever outlined his plan-perhaps he has? Could we have walked away from the banks? Im like a man watching his child on life support-I lurch from hope to despair on a daily basis according to the reports of economic doctors.

[Digout]

What was the alternative to the Bank Recapitalisation?? Im not sure Morgan Kelly has ever outlined his plan-perhaps he has? Could we have walked away from the banks? Im like a man watching his child on life support-I lurch from hope to despair on a daily basis according to the reports of economic doctors.

We could have nationalised them, fired all the management and created a toxic bank to transfer the bad debts into. This could all have been done ages ago. FF would not do this as it would upset the golden cicle. I would have disbanded the regulators office and created a new one at the same time.

[Outlander]

RTÉ Business: Bank liabilities 300% of GDP - Davy

It says this is 309% of the country's total economic output, the third highest figure in the euro zone. Davy says the Government has guaranteed €440 billion (237% of GDP) of this.

Where will we get €440 Billion?

The bank guarantee is a fiction.