Economic Crisis Blogburst 3: Take the money or open the box?

Apart from John’s piece, one thing anyone should get a hold of after ten this morning when it goes up, is the economic crisis panel from this morning’s Morning Ireland broadcast.

IN particular, Aine Lawlor’s lacerating interview with Brian Lenihan, who seems to be slowly capitulating to the international pressure, and which concluded with the rhetorical question: “Does that mean the government, the soldiers of destiny have failed us.”

Okay, here’s the best of the rest this morning…

– The heavy mob have already started arriving

– A far from smug assessment from David McWilliams (who might be forgiven for being such)…

Here are the numbers. As of yesterday, the ECB was sitting on assets of e1,878bn. These are government bonds and bank IOUs which the ECB takes as collateral for the cash it lends to the banks. Interestingly, the Irish central bank’s assets total €185bn.

So, the Irish central bank’s assets are about 10pc of the ECB’s. An unusual situation for a country that is only forecast to add 1.72pc of eurozone GDP in 2010.

If we look deeper, we see that the ECB has lent a total of €516bn to commercial banks within the entire eurozone. The Irish central bank has lent €165bn to banks based here. (Our GDP for 2010 is forecast to be €155bn.) So of all money lent to banks in the eurozone, 31pc is lent to banks based in Ireland.

What does all of this tell us?

That the Irish banking system is bust. But more importantly, the amount of money that is passing through the books of our central bank is completely unsustainable to a country of our size.

– It’s a theme reprised by Dan Hannan at the Telegraph with a little added Eurosceptical advice

Its (the ECB’s) policy of cheap money was arguably excessive even for the core European economies; for Ireland, it amounted to catastrophically pro-cyclical monetary policy. A credit bubble was inflated; the bust, when it came, was commensurately painful.

– Dan O’Brien on how the bailout is likely to happen

– Sinn Fein Keep Left blog from about a week back saying ‘burn the bondholders’… Oh, and Sammy Wilson tells us that Gerry is not the Messiah but a very naughty boy

– Lisa O’Connell has a recording of David McWilliams on the Germany money trap

– And Hugh Green notes that even now Ireland is in the throws of one of its oldest self deluding psychological trick:

…by confining our ideas about what is going on merely to the area of a range of potential decisions taken by government officials supplemented by the recommendations of assorted experts, are we not unconsciously engaging in a profound declaration that ‘we are where we are’?

And a good take from World By Storm questioning why the whole ‘economic sovereignty’ issue has been quite so overcooked (only making it that much more embarrassing for the government when it crosses its own imaginary red line?

– Last word to Fine Gael Brian Hayes TD who informed Newstalk listeners that “It’s hard to listen to Frank [Fahey of FF] because he’s talking shit”

So now it is up to Mr Lenihan to decide (although it sounds like it is no longer his decision to make): Take the money or open the (Pandora’s) box?

,

  • Itwas SammyMcNally whatdoneit

    Aine’s Interview was excellent.

    We are now at long last nearing the end of the denial stage that many credit councillors and debt collectors will readily recognise – this is the stage where the odd glance at the new TV or the tapping of the fingers on the family car can evoke an extremely emotional repsonse.

  • alanmaskey

    Are you trying to make a point here or merely giving links to a variety of blogs and online whinges?
    Can you please tell me the portfolio of Aine Lawler and her hubbie, also an RTE employee. Did they borrow any money? Do they share any of the blame? Null points.

    Incidentally, banks work on credit. They always lend more than they have and have done so since at least the time of he Genoans.

  • Mick Fealty

    That is veering off the point Alan. It’s a blog round up, you are not obliged to comment on it.

    If you want to pick one and argue with it do so. It will be easier to follow than just arguing with yourself.

    Oh, and stay off the man playing (or I’ll be getting out one of my nice shiny new yellow cards for you)…

  • Mack

    A nice graphic to cheer everyone up –

    http://img841.imageshack.us/img841/2199/dominoflags.jpg

  • alanmaskey

    You have about 10 links there. How does it make sense to argue for/against one and not with the others?
    1. Aine Lawlor hatchets FF.
    2. David McWilliams makes his usual points.
    3. Sammy Wilson makes predictable noises.
    4. Fine Gael d/o.
    5. The Daily Telegraph, a sensible paper.
    6. Some other dudes.

    It is a swirl of voices, all sound and fury. No light. The key men are Lenihan and Biffo, an unflattering picture of whom was in The Economist. It is only their voices and those of the EU/IMF which matter. The others should stfu.
    FF suffer from their populism. When all the dogs are allowed bark and howl, the sensible thing is to shut them up. But populism debars that. So we, along with the dogs, have to run after their tails.

  • Mack

    It’s just a collection of links on a topic – with a brief summary on each.

    I wouldn’t regard theses posts as a story, they’re a dropping off point to other parts of the internet.

    Maybe the Google philosophy – get your users to the external information they want as quickly as possible..

    Not everyone is going to research a topic and read all blog stories themselves so these are useful..

  • Sean Og

    I noticed an odd bit of graffiti on the wall near the Dublin Port tunnel yesterday –

    “Up the IMF!”

  • alanmaskey

    Mack: That is a good graphic. A pity I cannot give you full points. However, it should be improved:
    1. The hard line inner circle is Holl;and and Germany. France has devalued the franc three times since World war 2; Italy speculated against its own currency in 1997.

    Following the defeat of the Central European powers in the 1914-45 war (armistice from 1918-39), the Central European powers and France had to regroup.
    De Gaulle wanted to keep Britain out of the EEC for France’s own good reasons. Perfidious Albion played its own games, resisting the full integration the French and Germans and their satellite countries of the Netherlands and Belgium wished .
    The Euro went ahead without the British pound and the currency of the parasitic Swiss being included. It survived initial attacks on its credibility but its fatal flaws, the flaws at the very centre of the EU are:
    1. the Franco German split. Germany and the netherlands are the heavyweights.
    2. Club Med: the Mediteranean ex dictatorships, with Ireland an honorary member.
    3. Expanding Eastward. Anything east of Vienna and south of Paris is Africa in economic terms.

    The Celtic Tiger saga has had many hiastorical precursors. It will have many more. Ireland, the island behind trhe island, has abandoned violence. Now it is being incorporated to fill its nodescript place in the EU. It has the population of Sicily and will have the same power.
    With all this doom and gloom, it is worth mentioning that Iceland store chain is expanding in Ireland.
    Economically, especially in today’s world. Ireland is just an appendace of its bigger island neighbour. Sure, it has the Irish pub, the Irish breakfast and even Irish games and music. Bavaria without the guaranteed cash flows,.

  • Greenflag

    ‘banks work on credit.’

    As well as greed , and profit, and lies and whatever else works to keep them ahead of the competition and away from the clutches of those who would curb their excesses.

  • Aldamir

    Sorry but the post below is a repeat of another blog post I made on a different thread on this site. I wonder if anyone with more of an economic background could comment?

    The current strategy is to attempt to guarantee bank debts, so that those to whom the banks owe money (account holders, bond holders etc.) get their money back. The reason for this is obvious, if you think the public are angry now when their jobs are being cut and their wages lowered, just think of what they will be like when they are told that their savings and their pension funds are drastically reduced in value, while all their personal debts remain.

    This is why Angela Merkel, if I understand her correctly, was suggesting a managed default, a bit like a personal bankruptcy where creditors don’t get all their money back, but may get a few pence in the pound, thereby sharing the pain between the banks debtors and the banks creditors.

    Unfortunately the mere mention of this solution sent the markets crazy, which has led to the current pressures on Ireland.

    This solution is not pretty, in fact it will be nothing short of a disaster. The problem is, however, that if the current situation continues the more likely outcome is an even bigger disaster, an unmanaged default. This could leave the existing account holders and bond holders with nothing. Imagine going to take money from the bank and being told, sorry your bank account has disappeared, but sorry again you’ll still be expected to pay your mortgage of we’ll foreclose.

    In other words the current situation, especially in the Eurozone, could become as bad a disaster for the average person as German hyperinflation. The destruction of virtually all personal wealth.

    So far as I can see that’s how bad the situation is. I hope that some of those more expert in economics can tell me where my analysis is wrong, because I hope it is; but that’s the way it looks to me.

  • Wilde Rover

    Mick Fealty,

    “Oh, and stay off the man playing (or I’ll be getting out one of my nice shiny new yellow cards for you)…”

    Man playing? I thought the new term was “human interest angle”…