“What will be the end of this sorry saga?”

With tensions rising across Europe, Irish Life and Permanent suspended trading earlier today amid speculation that it would have to sell its profitable pensions and investments business, Irish Life, and its fund management business, Irish Life Investment Managers, after the publication of the bank stress test results tomorrow.

That publication is also expected to result in further nationalisation of the Irish banking sector with the banks expected to need “as much as 30bn euros ($42bn; £26bn) in additional capital”.

The BBC’s Robert Peston, still everyone’s hero, is having a “small panic attack” at the almost unbelievably large numbers involved.

No financial institution or bank will lend to them. Ireland’s banks can’t borrow from anyone except the Irish people (who, poor souls, have nowhere much else to put their deposits). But even if they wanted to, Irish households could not possibly put money into the banks fast enough to allow those banks to repay all the institutions – such as German banks – which lent far too much to Ireland’s banks in the boom years.

So when these wholesale lenders to Ireland’s banks have been demanding their money back (as they have been in a run that has been huge and inexorable), the money has come from the European Central Bank and the Central Bank of Ireland – or, indirectly, from the taxpayers of Ireland and the eurozone.

To prevent Irish banks toppling over one after another, the European Central Bank has lent 117bn euros to them and the Central Bank of Ireland has lent them a further 71bn euros. So that’s 188bn euros of loans from the eurozone’s taxpayers to Ireland’s banks – which makes the 67.5bn euros lent directly by the eurozone and IMF to the Irish government look like peanuts.

And a further 20bn euros of bank bonds – another form of bank debt – is still guaranteed by the Irish state through the Eligible Guarantee Scheme.

So that is 208bn euros of taxpayer loans to Ireland’s banks – equivalent to a remarkable 154% of GDP.

To ask the inevitable dumb question, what on earth went so spectacularly wrong?

Well, it’s a bit late to asking that now…  But you should read his answer.  And the Irish Times’ Arthur Beesley adds

European reluctance to contemplate burning senior bondholders is grounded in deep anxiety that such burden-sharing would undermine confidence in other weakened euro zone lenders, whose investors presumed heretofore that they would not be touched.

While the EU Commission is taking steps to introduce future burden-sharing measures, its plan is still embryonic.

In the backdrop lies Dublin’s growing reliance on emergency European Central Bank (ECB) support and the bank’s resistance to anything which might destabilise euro-zone markets.

Even though a succession of Irish ministers insist burden-sharing remains on the table as they seek to ease the weight of the bailout, such declarations come as the Government tries to negotiate better rescue terms with the ECB, the commission and the IMF.

The Government’s position is not at all strong, so repeated claims that the situation is now so grave as to merit pursuing senior bonds serves to emphasise the requirement for something else to ease the pain. Important here is the stance of Ireland’s euro-zone sponsors, which have a clear interest in not doing anything which might further threaten already shaky markets. With senior bond default a no-fly zone thus far in the crisis, there is nothing to suggest a rethink is imminent.

In addition, fresh electoral pressure on German chancellor Angela Merkel greatly diminishes her room for manoeuvre. The chancellor would be blamed if contagion from Irish banks dislodged any German lenders.

And how is the collective mood now?

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  • HeinzGuderian

    Reunification with The Kingdom !!

  • ForkHandles

    Thats some scary shit goin on there …
    Anyone got any advice for someone who may have a pension savings account with Irish Life? An account that may have only been opened a few years back and probably doesnt have too mucb in it…

  • If one substitues the country, Ireland, for the county, Jefferson, in this tale ……. http://market-ticker.org/akcs-www?post=183235 ….. the story and conclusions are essentially the same and Ireland and its residents should not be the ones who suffer from this series of acts, which had greedy banks falling all over themselves in the mad rush for crazy profits on deals which they failed to ensure were viable to entities who were targeted and entrapped with crazy offers of easy money.

    Their negligence, ie the banking systems negligence, and abject failure to establish knowledge and competence in that which they were doing, together with, what many if not all would posit, is nothing less than criminal, parasitic lending, has rendered their whole pack of cards modus operandi, and fiat currency scam operation, unfit for future purpose.

    Who facilitated the illegal and fraudulent acts, with crazy loans whose only real purpose are to enslave with the notion of indebtedness and the payment of punitive interest to boot.

  • Munsterview

    Pete : ” “What will be the end of this sorry saga?……”

    I should thought that was obvious to anyone with a grain of political nonuse, the system is doing exactly what it was designed by the capitalist banker class to do. The more profitable parts of Irish Life will be sold off at firesale prices further enriching the already financially bloated minority to resell at yet another handsome profit margin while the majority of the taxpaying populace are left with the dud assets to be paid for over generations.

    There is no difference between the greed of Tony O’Reily and co who started this current asset stripping the old P&T after the Indo group had led a Greek Chorus for it for years and the earlier Elizabethan plundering buccaneers who shelled out the Irish Monasteries, schools and other native infrastructure concealing their gross greed and robbery under the guise of advancing the Reformation.

    Quite simply Dermot Desmond et al threw brown envelope off the record funds at the Fianna Failed party who in turn allowed them to party without check or balance. This is the morning after the night before and there were plenty of us that warned that such a day would come !

  • Greenflag

    @ martian ,

    Well said and that link to Jefferson County Alabama is telling.

    We read that Bank of America paid NO taxes last year or the year before while benefiting from 49 billion dollars of bail out from taxpayers . Likewise GE did’nt pay any taxes . In fact most of the larger corporations have become so adept at employing the highest paid tax avoidance lawyers that in effect most are now being subsidised by ordinary taxpayers -it’s called corporate welfare and it’s evidence of the victory of oligarchic capital over America’s now near servile middle and working and non working classes 🙁

    ‘Their negligence, ie the banking systems negligence, and abject failure to establish knowledge and competence in that which they were doing, together with, what many if not all would posit, is nothing less than criminal, parasitic lending, has rendered their whole pack of cards modus operandi, and fiat currency scam operation, unfit for future purpose.’

    Ah the unfit for future purpose motif . Indeed . This particular aspect of anarchic capitalism has’nt much longer left re survival . There will be either another world wide financial meltdown and double or treble dip recession or revolution or major reform that cannot wait for 2013 !

    ‘Who facilitated the illegal and fraudulent acts, with crazy loans whose only real purpose are to enslave with the notion of indebtedness and the payment of punitive interest to boot.’

    The elected present and former governments of all the western democracies going back at least 20 years who bent over every which way they could to facilitate the gangster bankers in the hope of ‘collecting ‘ themselves 🙁

    Madame Guillotine -Quelle etes vous ?

  • Mark

    We’re going to need plus d’un Madame Guillotine to solve our problems …

    Apts accross the road which had halfed in value in the last 3 years had a firesale thru Hooke and McDonald just before Christmas . 29 luxury units , all mod cans etc sold in a week .

    Nine of the buyers had to pullout because they could get finance from the banks ..

  • wee buns

    It could be a spectacular opportunity. Drop the serfdom deal. Reorganize and reform.

    A foolproof plan I tell you.

  • Brian

    What Ireland needs is a Louis Saint-Just…

  • Cynic2

    Sell up and move out.

    Wee Sammy will give you a fair price for the whole country and good Free P economics (Trust in the Lord and his Disciples the Developers) will soon set it back on its feet.

  • Munsterview

    Cynic2………. Not an option !

    Since Wee Sammy, just like his father, grandfather and great grandfather is living on land that is dependent on English State Handout rather than earned income for economic survival and existence, under new EU stress rules for financial borrowing, the chances of ‘Wee Sammy’, ‘Orange Lil’ or anyone else dependant on such financial handouts getting a morguage to purchase even enough ground to grow a gooseberry bush is pretty remote !

    Any more suggestions ?

  • And this is an educating read ……. http://www.zerohedge.com/article/don%E2%80%99t-believe-chart-us-dollar-dropping-stone …. about crooked deeds and a global conspiracy to enslave the world masses to currency manipulators and manufacturers/bankers and printers.

    Although even now they are plotting on electronic slavery to the magic credit delivered as debt system, which allows the controllers to live like kings and queens for free with you providing them with their every need and whim at a crippling price to be repaid with interest.

    And whenever your dear politicians know of that scam, what are you to make of their collusion in perpetuating its pain?

  • Munsterview

    Taken from Wealth daily March 24th, 2011.

    The World debt bubble just popped !

    F*** the Fed!

    Right now, the world’s central banks are printing money like there is no tomorrow. And as each desperate act to calm the markets fails, the value of everyone’s purchasing power is being squeezed to nothing.

    Most investors are running to physical gold…

    But I recently uncovered an opportunity that could not only help your portfolio break even.

    In fact, it could triple your wealth in very short order, as the rest of the economy crumbles. Click here for full details.

    Over the next several months, investors will come to gold and silver after they have gone through a process of elimination, investing in other over-valued investments such as currencies, real estate, and Dow-related stocks.

    Once these investments start to decline, investors will jump from one over-valued investment class to another until they finally discover the precious metals.

    This transition has been slowly been taking place over the past several years.

    At some point, the U.S. dollar will be in free-fall — and the stampede to gold will be in full swing.

    The gargantuan financial risks that exist in our global markets are staggering. When you understand the risks to the market with naked short selling, derivatives insanity, unsustainable debt structures of governments worldwide, etc… it leaves you with a very uneasy feeling.

    These risks are very real and hardly understood by the average citizen.

    World Prepares for Staggering Debt Bubble

    We’re in the midst of a huge bubble in the debt markets that’s probably going to get bigger before it finally deflates.

    That bubble is characterized by huge bets on risk in the markets for government notes, corporate bonds, home mortgages, and the various synthetic derivatives based on those instruments.

    These bets are getting larger and larger as those involved have to keep going to the next level of risk to manage their current unsustainable position.

    The question is can these bubbles be deflated slowly or will they just pop. Either way, the die is cast.

    The people who tout the idea that these risks to the system will just disappear with little or no consequence are living in a fairytale land.

    Gold and silver will be going much higher as events worldwide continue to unfold. Beware of those who maliciously and negatively pound on gold, trying to mislead you from the very asset class that will protect you.

    The mainstream media keeps referring to gold being in a bubble, suggesting the yellow metal is destined to collapse…

    But whether it’s FOX or CNN, conservative or liberal, the engines of mass media are fueled by the revenue from their corporate advertisers.

    And these giants ultimately depend on your continued faith in the U.S. economy and dollar.

  • Munsterview

    From Wealth daily March 3rd, 2011…….. sound farmilar ?

    I have recommended Wealth Daily before to slugger readers, time and again it has been weeks and often months ahead of the pack in identifying US and International trends. While primarily an investment advice newsletter, to advise it has to take account of National and International geo-political trends and as a consequence is also well ahead in forecasting crisis that very often as in Ireland, are denied by politicians until they are in crisis mode when there is no denying the difficulties.

    ********************

    The new cause for bullishness

    Have I lost my mind?

    That’s cause for bullishness?

    The press is getting way ahead of itself, just as it’s done in the past. And they’re trying it again — because it sells.

    Plus, with oil over $100 a barrel again, you can bet money will be leaving the average Americans pocket even faster than before, leaving less for discretionary spending and spending on housing.

    And that means fewer dollars for home shopping.

    “Every $10 rise in oil prices, if sustained, subtracts a one-half percentage point from gross domestic product growth. Every 1% increase in GDP translates into about one million new jobs. So, if oil prices don’t reverse, the drag on GDP growth could mean 500,000 fewer new jobs created over the course of 2011,” The Wall Street Journal reported recently.

    The heart of the matter

    I agree with a couple of Jeffery’s bullish cases, but here are the ones I just couldn’t get behind.*

    Jobs. “Housing follows jobs. While the job market is still bunk in many areas, pockets of strength are emerging. After Google Inc. announced it would be hiring as many as 6,000 new employees, the Silicon Valley powerhouse received 75,000 applications in two weeks.”

    Jobs.

    *italicized text quoted from Jeffery’s article

    We’ve added what, about 36,000 jobs in January? That should be great for housing demand.

    But if you dig a bit further, here’s what’s really happening with unemployment…

    Almost 14 million Americans are unemployed. Of those, more than six million have been unemployed for six months or more; another four million left the labor force after giving up looking for work.

    But jobs will lead housing higher, right?

    Pent up demand among your adults. “Today’s young adults are under-represented as homeowners compared to historical norms, and a disproportionately large chunk lives at home. As the job market crawls back to life, this trend is likely to reverse.”

    A fraction of recent college graduates still haven’t found a job after graduating years ago. Bu sure, there will be plenty of pent-up demand. Apartment demand, maybe.

    Foreclosures. “Frankly, I’m getting tired of people claiming that an impending flood of distressed real estate is going to torpedo home prices. If you’re making that case, ask yourself if you really, truly have any idea what you’re talking about.”

    Foreclosures are not slowing.

    As I’ve been saying for months now, millions of homes sit empty. Debt-stricken, pressured consumers don’t want to buy. Household formations have slowed considerably.

    The glut of unsold homes is smothering any flicker of housing hope.

    Loans in delinquency are at some stage of the foreclosure process.

    There’s worrisome negative equity, in which the mortgage exceeds the home value, affecting about five million homes.

    Peter Schiff still sees a 20% decline in home values just to bring them back to historical trends.

    Close to 11% of all U.S. homes stand empty. It’s being projected that banks will repossess another million homes this year, adding to the supply glut. And prices will come down. In fact, some claim that home prices will fall another 10% to 20% before a bottom can even be seen.

    Inflation. “Things get scary when consumers start believing that prices are rising, or about to rise. Historically, real estate has been a rather good hedge against inflation. As people start to get nervous about inflation, they buy real estate.”

    Higher food and energy costs are driving inflationary pressures higher. This will put a real dent in the cash that Americans have left to spend on housing.

    In order for real estate to be a hedge against inflation, one thing must happen: Real estate must be able to hold its value.

    Confidence.

    I’m sure the millions that are out of work have plenty of confidence… and cash to buy a home.

    A beaten down U.S. consumer is not confident in housing. Less than two-thirds of Americans think homes are safe investments.

    In fact, according to Fannie Mae’s Fourth Quarter Housing Survey: “Fewer Americans feel confident about home ownership particularly as it pertains to being a safe investment. That confidence has slipped since the January 2010 survey when the housing market was just beginning to show signs of stabilization.”

    That’s down from the 83% seen before the housing boom. Plus, tighter lending standards and higher interest rates aren’t likely to drive confidence higher…

    Want honesty?

    Truth has become a four-letter word for the press and the greater United States.

    We’re not seeing a housing recovery…

    About eight million Americans are at least a month behind on mortgage. Another five million are at least two months behind.

    And Deutsche Bank says that 48% of all U.S. mortgages could have negative equity by the close of 2011.

    That’s the truth the press won’t tell you.

    But that kind of story doesn’t sell — it’s not hip or sexy anymore to talk about how the bottom is still falling out.

    There’s a better way to get the news…

    Reading Wealth Daily is a step in the right direction. We’re not concerned with flashy headlines or “what sells”. We’re concerned with delivering market news and effective investment strategies to our readers.

  • Any who think that the higher price for gold and silver, or any precious metals, is not just creating another bubble to pop, are living in cloud cuckoo land. And buy any significant quantity of gold and what do you get? ……. a piece of paper which is telling you that someone else is looking after it for you, whilst in reality you have purchased diddly squat if you don’t have it physically.

    Recently I received an email from my bank, advising me that under an obviously new Financial Services Compensation Scheme, my deposits were guaranteed up to a value of £85000, in the event of a bank failure. It was a very awkward conversation for them whenever I asked what happens to the other £415000, whenever I had deposited a half a million with them for safe keeping, and who had stolen that whilst under their care and protection. Are there crooks actually working inside the banks?

    You might like to inquire of your own branch as to whether they have similar right dodgy arrangements which render banks decidedly unsafe, to say the least.

  • Munsterview

    Amanfrom……

    As I have previously pointed out, I get the Wealth daily newsletter for the background political information provided, that is in regard to most events, far ahead of the pack and indeed far more reliable as an information source than most of the mainstream media.

    It is in this context that I posted the above abstracts as they present a very different picture of US and World economic prospects when compared to mainstream media predictions.

    I agree that the buying of Gold, Silver or other rare earth metals with only a holding company receipt rather than physical possession of the commodity concerned is as fraught with danger in the event of an economic collapse as is any other form of ‘paper’ investment.