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Thread: It's All Circular - Funding Of Irish Banks During The Celtic Tiger

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    Default It's All Circular - Funding Of Irish Banks During The Celtic Tiger

    We had plenty of talk about the bank balance sheets in European banks here on p.ie and the possible sources for the reckless lending in the Irish economy during the Celtic tiger years. Last but not least to better understand the collapse of the Irish economy in 2008 and its aftermath.

    We have discussed a number of possible sources for the wall of money that crashed into the country e.g. reckless eurozone banks flooding the domestic Irish banking system with cheap cash, bankers in the city of London on a drug induced predatory lending splurge and the complete mayhem unleashed by the introduction of subprime CDOs in the US combined with the complicity of rating agencies in creating the toxic debts packages.

    After a couple of month following the threads on p.ie now it becomes clear that most of the money in Ireland actually came from Irish banks themselves by way of mortgage book expansions. So how did that work? You may ask. Well one has to understand that the loans made by the Irish banks were recorded as assets. But the money the banks have lent out to the developers, investors and mortgage holders never existed in Irish banks in the first place. They instead created the money out of thin air. These shenanigans could go on as long as the banks could find new customers for their ponzi scheme but once they had exhausted the lending market they were in deep deep trouble.

    Now the question I have is can we quantify this credit expansion in Ireland? And how much of the €100bn+ in mortgage debt in Ireland was created or made up if you like in Irish banks? Is the promissory notes deal the price we have to accept for allowing the ship of fools to embark on this financial odyssey?
    Last edited by YouKnowWhatIMeanLike; 11th February 2013 at 05:27 PM.

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    Banks are in the business of growth, but the problem in Ireland was unregulated growth due to greed and the link between politics and corruption in finance, banking, planning, etc.

    The growth and stability pact we made with our neighbours to run a responsible economy was effectively ignored by everyone.

    But that was okay, because our 'leaders' knew we could always write a note to future generations promising that they could help pay the bill for the stupidity and greed of their ancestors.
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    Quote Originally Posted by YouKnowWhatIMeanLike View Post
    We had plenty of talk about the bank balance sheets in European banks here on p.ie and the possible sources for the reckless lending in the Irish economy during the Celtic tiger years. Last but not least to better understand the collapse of the Irish economy in 2008 and its aftermath.

    We have discussed a number of possible sources for the wall of money that crashed into the country e.g. reckless eurozone banks flooding the domestic Irish banking system with cheap cash, bankers in the city of London on a drug induced predatory lending splurge and the complete mayhem unleashed by the introduction of subprime CDOs in the US combined with the complicity of rating agencies in creating the toxic debts packages.

    After a couple of month following the threads on p.ie now it becomes clear that most of the money in Ireland actually came from Irish banks themselves by way of mortgage book expansions. So how did that work? You may ask. Well one has to understand that the loans made by the Irish banks were recorded as assets. But the money the banks have lent out to the developers, investors and mortgage holders never existed in Irish banks in the first place. They instead created the money out of thin air. These shenanigans could go on as long as the banks could find new customers for their ponzi scheme but once they had exhausted the lending market they were in deep deep trouble.

    Now the question I have is can we quantify this credit expansion in Ireland? And how much of the €100bn+ in mortgage debt in Ireland was created or made up if you like in Irish banks? Is the promissory notes deal the price we have to accept for allowing the ship of fools to embark on this financial odyssey?
    Can you show us a bank balance sheet from the time with all this money created out of thin air?

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    Quote Originally Posted by ManUnited View Post
    Can you show us a bank balance sheet from the time with all this money created out of thin air?
    Anglo had a self-declared 125% deposit to lending ratio in 2008 (that's probably a euphemism, put a zero on the end he's a friend). Irish banks loan to deposit ration average was 180% in 2010 according to the department of finance ....

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    Quote Originally Posted by YouKnowWhatIMeanLike View Post
    Anglo had a self-declared 125% deposit to lending ratio in 2008 (that's probably a euphemism, put a zero on the end he's a friend). Irish banks loan to deposit ration average was 180% in 2010 according to the department of finance ....
    It shouldn't be so difficult to chose a bank, any bank, and show all the money created from thin air.
    I can save you a bit of time if you like and tell you that you wont be able to, because it is not there.
    Banks borrow from x and lend to y and pocket the difference in interest.

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    Politics.ie Member clearmurk's Avatar
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    Quote Originally Posted by YouKnowWhatIMeanLike View Post
    We had plenty of talk about the bank balance sheets in European banks here on p.ie and the possible sources for the reckless lending in the Irish economy during the Celtic tiger years. Last but not least to better understand the collapse of the Irish economy in 2008 and its aftermath.

    We have discussed a number of possible sources for the wall of money that crashed into the country e.g. reckless eurozone banks flooding the domestic Irish banking system with cheap cash, bankers in the city of London on a drug induced predatory lending splurge and the complete mayhem unleashed by the introduction of subprime CDOs in the US combined with the complicity of rating agencies in creating the toxic debts packages.

    After a couple of month following the threads on p.ie now it becomes clear that most of the money in Ireland actually came from Irish banks themselves by way of mortgage book expansions. So how did that work? You may ask. Well one has to understand that the loans made by the Irish banks were recorded as assets. But the money the banks have lent out to the developers, investors and mortgage holders never existed in Irish banks in the first place. They instead created the money out of thin air. These shenanigans could go on as long as the banks could find new customers for their ponzi scheme but once they had exhausted the lending market they were in deep deep trouble.

    Now the question I have is can we quantify this credit expansion in Ireland? And how much of the €100bn+ in mortgage debt in Ireland was created or made up if you like in Irish banks? Is the promissory notes deal the price we have to accept for allowing the ship of fools to embark on this financial odyssey?
    The implication of what you are saying is that the Central Bank of Ireland, and by extension the ECB, lost complete control of the money supply in Ireland.

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    Quote Originally Posted by ManUnited View Post
    It shouldn't be so difficult to chose a bank, any bank, and show all the money created from thin air.
    I can save you a bit of time if you like and tell you that you wont be able to, because it is not there.
    Banks borrow from x and lend to y and pocket the difference in interest.
    That manages to sound like a zero-sum game. Given that the eurozone money supply has pretty much continually expanded, where is money being created there?
    Never let the best be the enemy of the good.

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    Quote Originally Posted by clearmurk View Post
    The implication of what you are saying is that the Central Bank of Ireland, and by extension the ECB, lost complete control of the money supply in Ireland.
    unfortunately I can't counter your claim here at the moment. this is probably the reason why the new Oireachtas (Inquiries, Privileges and Procedures) Bill 2012 is currently being drafted to indemnify former and future office holders in Ireland from any kind of possible legal action.
    Last edited by YouKnowWhatIMeanLike; 13th February 2013 at 02:22 AM.

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    Quote Originally Posted by ibis View Post
    That manages to sound like a zero-sum game. Given that the eurozone money supply has pretty much continually expanded, where is money being created there?
    The banking system as a whole expands the 'money supply'.Central banks are the only actors who can create money.
    If the OP is right, why did we need to bail anyone out? You could go further and ask why do governments insure deposits? Why do we have bank runs? All the money the Irish banks lent out came from somewhere real, not the ether.

  10. #10

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    Quote Originally Posted by ManUnited View Post
    The banking system as a whole expands the 'money supply'.Central banks are the only actors who can create money.
    If the OP is right, why did we need to bail anyone out? You could go further and ask why do governments insure deposits? Why do we have bank runs? All the money the Irish banks lent out came from somewhere real, not the ether.
    now let's take an example Fiona a lending manager at Anglo Irish Bank approves a multi-million loan in 2005 for a well known developer. Where does the money come from in your opinion?

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