Fianna Fáiled: Ireland Prints 25% of its GDP in German Euro's

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Tue, 01/18/2011 - 08:02 | 883628 irishlink
irishlink's picture

I've read and reread this and there is only one answer; the Irish Banks are running out of money fast and as the bail out is not yet ratified,the EU are allowing the Irish Central Bank to create electronic credit which can be put against the bailout money when it arrives. It also buys more time for Trichet et al to come up with a more coherent , workable plan for the entire Eurozone as this plan concocted for Ireland and Greece clearly is a dismal failure.

Tue, 01/18/2011 - 07:39 | 883621 Fat Ass
Fat Ass's picture

For hell's sake, it's simply 10s, THERE IS NO APOSTROPHE.

PLURALS DO NOT HAVE APOSTROPHES.

"10s of billions"  It's that simple - NO APOSTROPHE.

If you look LIKE AN IDIOT when you write, it really makes you LOOK LIKE AN IDIOT.

There are NO APOSTROPHES IN PLURALS, for goodness sake.

Tue, 01/18/2011 - 06:32 | 883610 AUD
AUD's picture

They have printed up about 25% of their GDP in electronic credits, and stuffed those credits into their banks.  These deposits, if you will, do not have new debt issued behind them.

This is pure bullshit. No central bank can create credit without collateral. The question is whether the collateral has any value outside of the bid of the central bank.

Tue, 01/18/2011 - 13:20 | 883606 M.B. Drapier
M.B. Drapier's picture

This isn't all that new, and the money-printing angle isn't as dramatic as it appears. Lorcan Roche Kelly and his blog commentators like "Eoin Bond" have been on this for a while now.

The Irish Central Bank has crossed the Rubicon in European Union currency terms. They have printed up about 25% of their GDP in electronic credits, and stuffed those credits into their banks. These deposits, if you will, do not have new debt issued behind them.

The "Other Assets" money is Emergency Liquidity Assistance in Eurosystem terms. This is a repo scheme, like the ECB's liquidity program. To the extent that it's money-printing, the ECB's emergency repos are money-printing too. The two critical differences between ELA and ECB liquidity are:

  1. The collateral standards are set by the National Central Bank, and don't have to meed the quality required for ECB repo
  2. Unlike most Eurosystem (ie. ECB + National Central Banks) dealings, these do not appear on the Eurosystem's consolidated balance sheet, and the rest of the Eurosystem isn't liable for any losses. The taxpayer in the issuing country is on the hook for those

So it's actually quite similar to the ECB/whole Eurosystem's problems with high leverage and dodgy repo collateral, except that some of the Irish ELA collateral is even worse, and in fact unlike the ECB the Central Bank of Ireland can't print away any losses on its repos.

As you can see, the ECB is aware of and has approved the Irish ELA operations. It can't be at all happy that what was meant to be a mechanism for temporary fudges has spawned a 25%-of-GDP-and-still-growing monster, but it would much rather live with it than face the 'unthinkable' alternative of haircuts for senior bank debt. It does have a plan (a joint plan with the EU Commission and the Irish government) to deal with the situation - deleverage the Irish banks, shovel in more money from the Irish taxpayer (already on the hook for ELA losses anyway), divert the money from the country's pension funds into the banks. (The 'retirement savings' which have gone in so far are just money from an SWF supposedly earmarked for public-sector pensions. The private-sector pensions have yet to be fleeced.) How well the plan will succeed is another matter, especially if depositors keep fleeing the Irish-guaranteed banks.

Tue, 01/18/2011 - 04:07 | 883566 Sudden Debt
Sudden Debt's picture

Jack, I just stole your article and mailed it to everybody in my mailbox.

THAT

IS 

JUST

SICKENING

My god...

For the first time in 2011, I'm actually chocked about something.

 

Tue, 01/18/2011 - 04:48 | 883574 scratch_and_sniff
scratch_and_sniff's picture

It never crossed your mind to discover whether or not it was fucking nonsense before you sent it to all your suffering friends?

Its ELA? Its not German Euros, what utter gibberish. The reason for any secrecy involved when using ELA goes back a long way even before the crisis, its always been like that when banks needed to use it, no one wants to see markets spooked over a liquidity crisis when its easily avoided etc

When you look at the context in which they are using emergency liquidity, things become a lot less alarming. The amount needed to backstop Irish banks is gradually dwindling(down 40% from nov), but even so, some Irish banks have totally taken the piss when drawing from the ECB, and hence have exhausted they're welcome. But even still, the scheme from which they are drawing from now(from the Irish central bank), is called "special master repurchase agreements", is still part of ELA.

from FT

"The current ELA scheme is understood to involve collateral which would not normally be acceptable to the ECB."...which means that it is now acceptable.

Tue, 01/18/2011 - 13:57 | 884431 M.B. Drapier
M.B. Drapier's picture

When you look at the context in which they are using emergency liquidity, things become a lot less alarming. The amount needed to backstop Irish banks is gradually dwindling(down 40% from nov), but even so, some Irish banks have totally taken the piss when drawing from the ECB, and hence have exhausted they're welcome.

The banks which are in trouble are the six Irish-owned banks guaranteed by the Irish government, and there's no way that the Sick Six, as opposed to the larger group of banks regulated in Ireland, has reduced its funding needs since November. Almost certainly the Six are borrowing about as much as ever from the ECB, as well as relying on the Central Bank of Ireland to lend to them against collateral which isn't acceptable at the ECB.

Tue, 01/18/2011 - 14:49 | 884605 scratch_and_sniff
scratch_and_sniff's picture

Sorry about that, rather the rate of expansion is down 40%+. Can i call that a dwindle? pff i suppose i could.

Tue, 01/18/2011 - 08:28 | 883642 hardcleareye
hardcleareye's picture

" fucking nonsense "??????

A tad harsh don't you think?  If I read FT correctly the Emergency Liquidation Assistance is funded in Euros, I wasn't aware that there was such a thing as a "German Euro" please explain..... the nuance is lost.... Further reading of the Position Paper on the ECB web site indicated that there is justifiable reason for concern and I dare say maybe a bit for "alarm".

The ice gets very thin when you post bullshit collateral to print money... 25% of your GDP!!...  yeah I think SD has reason to be concerned... the same concern mirrored by the ECB.

This from FT.

The opinion says “the ECB has serious concerns that the draft law is insufficiently legally certain on a number of critical issues for the eurosystem [of eurozone national central banks].” One such issue was “the scope of collateral rights of central banks given as security against emergency liquidity assistance”.

The legislation needed to be clarified to make clear “the ability of the central bank or the ECB to maintain the eurosystem’s operations and, in particular, to enforce their rights including, without limitation, the enforcement of security over any eligible collateral posted by any relevant institution.”

The ECB adds that the legislation “should make clear the [EU] Treaty principle of central bank independence prevails over any incompatible draft law provision”.

 

Tue, 01/18/2011 - 14:18 | 884495 scratch_and_sniff
scratch_and_sniff's picture

Sorry for my language, i must stop becoming so easily excitable. For an explanation of the used term "German Euros", read the post you are commenting on. Secondly, I am not trying to say Ireland is not practically insolvent, but this is a trivial issue about liquidity. The damage, as per the above post, was supposed to happen when everyone found out they knew nothing about what the Irish CB was up to...but they did from the start, that’s why its a moot point to begin with.

What also makes it a moot point is that the collateral provisions implemented by the ECB with respect to ELA were only to stop banks grabbing easy money to speculate with as far as I know, nothing to do with keeping them liquid. More to the point, the fact that its only a matter of willingly rejigging obviously meaningless legal frameworks until the (illiquid)banks can gorge on infinite ELA, should give ample insight into how much of a waste of time actually talking about this has become.

 

On a more frivolous note, who really gives a flying fuck whether or not another $50bln was thrown into a sea of kazillions of ludicrous zeros? Not me pal.

Tue, 01/18/2011 - 03:36 | 883554 ebworthen
ebworthen's picture

There is no money, only zeros and ones.

There is no "printing", only binary data shuffling and stuffing.

Currencies unbacked by a precious metal in the information age are nothing but binary data, electrical current.

Who says who has how much money? 

There isn't a physical constraint to any of it.

Tue, 01/18/2011 - 01:29 | 883480 Arthur
Arthur's picture

If the Irish are printing Euro's any reason to think the other's are not?   Greece was already nailed for cooking their books why not just print who would know?

I assumed that there was one central printing press.  Do all EU countries have the ability to print their own Euro's?   That would be wacky.  One thing to issue bonds but a licence to print?! Wow.

 

Tue, 01/18/2011 - 01:40 | 883485 beastie
beastie's picture

They are not physically printing anything. The same as Ben is not physically printing anything. Just Bits and bytes.

Now we know what the Central Banks are for in individual countries of the EU.

I have not seen any confirmation of this story. I dn't read the Irish papers every day though so I may have missed it.

Tue, 01/18/2011 - 02:14 | 883511 Jack H Barnes
Jack H Barnes's picture

This is the source of the article itself.  I Should have made it clearer.  Its a link in the article.

My Bad.

 

Jack.

http://www.independent.ie/business/irish/central-bank-steps-up-its-cash-...

Tue, 01/18/2011 - 02:08 | 883503 Arthur
Arthur's picture

Thanks for the clarification

Tue, 01/18/2011 - 01:07 | 883465 laughing_swordfish
laughing_swordfish's picture

I don't think this ends well....

It's as if I swiped knukles' American Express card and decided to take myself down to Wynn's High Roller Room...

The world is about to get a third helping of Furor Teutonicus..

The Leopard II's of the Wehrmacht will roll through the Ardennes..

The Luftwaffe will once again rule the skies...

And the Kriegsmarine will seal off the Atlantic from its new ports on the Brittany coast...

Fourth Reich Bitchez...

 

KrvtKpt. Laughing Swordfish

Behfelshaber der Unterseebooten

 

 

 

Tue, 01/18/2011 - 00:39 | 883424 knukles
knukles's picture

You have really got to be kidding me. 

First Mr. Obangopangodango from the Ivory Coast asks his creditors to approve of his legally non-existant gubamint else he'll skip a coupon payment already in arrears....
Fucking unreal.

And now The Emerald Isle is simply creating electronic fiat liabilities out of their bank with no offsetting assets on the books but fictional, notional, nonsensical naughts and zilches held by nobody.
T'is a great day for the republic, lads! 

This shit is brilliant in it's audacity! 

Allow me to be the first to call Bullshit Ahoy.

(It's all right to leave the boy with Uncle Ernie.)

Tue, 01/18/2011 - 00:02 | 883363 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Brian Cowen and Bernanke sit together on a park bench reading news papers.  Ms. Sarkozy walks by wearing daisy dukes and boots.  A cowboy hat keeps the bright sun from her eyes.  Brian Cowen stands up and tips his hat to her.  Bernanke follows and does the same.  Cowen turns to Bernanke and sings, "Anything you can do I can do better.  I can do anything better than you."  Bernanke, "No you can't."  "Yes I can!"  "No you can't!"  "Yes I can."

Tue, 01/18/2011 - 02:26 | 883520 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Are you just practicing the "elevator pitch" for this musical you're writin'?

Tue, 01/18/2011 - 00:02 | 883362 cranky-old-geezer
cranky-old-geezer's picture

"The bail out of Ireland, funded currently from their own retirement savings..."

This is the only significant statement in the entire piece. 

...and it's coming to a nation near you.

Mon, 01/17/2011 - 23:49 | 883337 stormsailor
stormsailor's picture

i love the irish, they have managed to solve their immediate problem, and at the same time point out the hypocrisy and arrogance of the ecu, ecb, and the federal reserve.

what makes the zero's they put behind a 1 and give out to whomever they please worth anything. anymore than their on home-made 1s and zeros.

 

who elected any of them to make decisions to exchange real euro for bogus securities or the power to choose who gets it, and who does not and at what cost.

 

up the republic

 

 

Mon, 01/17/2011 - 23:38 | 883320 Silversinner
Silversinner's picture

If this isn't überbullish for euro gold price

what is?Time to load up on gold after

gold is close to the 1000 euro mark.

1000 euro goldprice will soon be history

just like the 1000$ price is now.

 

 

Tue, 01/18/2011 - 00:27 | 883409 cranky-old-geezer
cranky-old-geezer's picture

Anyone still holding faith in the euro or dollar is ...well ...just plain crazy.  The euro will soon be toilet paper and the dollar not far behind.  Sure, they'll widly celebrate a 35,000 Dow but it won't be worth enough to pay for the party.

Tue, 01/18/2011 - 00:42 | 883433 knukles
knukles's picture

Bingo. Give the man a salted euro.
While the S&P, for example was about flat total return wise over the last decade, in gold terms, it's crumbled.... major negative return.

Mon, 01/17/2011 - 23:21 | 883283 Convolved Man
Convolved Man's picture

To appease Merkel and the Germans, Trichet will have Chief Inspector Clouseau assigned to investigate reports of electronic naked currency printing in Ireland.  Ensuing slapstick comedy assured to be enjoyed by all.  Bernanke makes a cameo appearance as Dr. QE, the world's renowned expert in money printing, hired to perform forensic examination of 1s and 0s in Irish Central Bank accounts.

Mon, 01/17/2011 - 23:06 | 883256 Sean7k
Sean7k's picture

Hard to take this seriously when the author uses the example of the FED dumping 3.5 trillion into the banks- as if it was fictional. The FED did dump trillions and yet here we are.

Why is it so easy to see the splinter in Ireland's eye and not the log in ours?

Tue, 01/18/2011 - 04:54 | 883575 shortus cynicus
shortus cynicus's picture

oh not exactly: FED pumped 12 trillion in global financial institutions.

But, it is their private money, let them print. But don't use it.

Mon, 01/17/2011 - 23:07 | 883255 gorillaonyourback
gorillaonyourback's picture

thank you for the insight, we wonder when its goin to blow up and now we see how germany may be forced to blow it up.

Mon, 01/17/2011 - 22:56 | 883241 apberusdisvet
apberusdisvet's picture

 

It is very difficult for me to believe that the Irish will willingly place themselves in a position of involuntary servitude for at least a generation to the Euro banksters.  Have they in just a few generations become a nation of pussies?

Tue, 01/18/2011 - 01:26 | 883468 zaphod
zaphod's picture

You could say that just about any western country. US, UK, Spain, Canada, etc.

Only Iceland seems to be standing for themselves against the banks.

Tue, 01/18/2011 - 00:50 | 883445 RingToneDeaf
RingToneDeaf's picture

The Irish here in the states have distinguished themselves in many of the toughest battles as American military going all the way back to the Civil War, when not fighting among themselves.

The Muslims would love a Califate in France and Germany.

Europe has a long history of war, even the Swedes still might have some balls, chased through the weeds by a Norwegian....... Yes, war is likely, soon.

Mon, 01/17/2011 - 22:55 | 883239 Founders Keeper
Founders Keeper's picture

[The capacity to print electronic credits, with out the creation of cash currency or debt, is a new wrinkle in the economic landscape.]---Jack H. Barnes

Reminds me of something the Fed is doing.  What was that...?  Oh yeah, creating trillions of USD out of thin air.

Seriously though, excellent article, Jack. Thank you.

[In the coming weeks, and I say that because thing rarely happen quickly in life, Europe is going to have a Sovereign crisis of epic size.]

Yes, things seems a bit too quiet lately in Europe. Something is moving down deep.

I expect the Chinese will be sending more fat rolls of 100 USD to plug leaks springing up in the euro zone.  The Chinese need the euro zone to hold together a little longer while the Chinese off load their USDs. Gotta stop the dominoes from falling as long as possible.

 

Tue, 01/18/2011 - 00:17 | 883388 cranky-old-geezer
cranky-old-geezer's picture

"I expect the Chinese will be sending more fat rolls of 100 USD to plug leaks springing up in the euro zone."

Neat.  Three birds with one stone.  (a) offload large amounts of toxic US debt (b) in a legit looking way that won't raise eyebrows (c) shore up one of their biggest trade partners.

Mon, 01/17/2011 - 23:13 | 883272 Bubbles...bubbl...
Bubbles...bubbles everywhere's picture

The chinese communists are trying to to stop the capitalist dominoes from falling. I find the irony very amusing. 

Tue, 01/18/2011 - 00:40 | 883426 knukles
knukles's picture

Fuck's called buying on the dip....

Tue, 01/18/2011 - 00:08 | 883376 Eternal Student
Eternal Student's picture

+1. That is indeed amusing.

Mon, 01/17/2011 - 22:27 | 883194 merehuman
merehuman's picture

I would love to see Ms Merkel take a bat to Bernankes head. He set the tone and is the leading example of a wide open unbacked money printer.

I would like to see the germans go back to the Mark, backed by gold.

PS As a kid in germany i watched at night as the stoutly built German women came and dragged their husbands out of the bar. One had brought a large dough rolling pin and used it liberally.

Mon, 01/17/2011 - 22:21 | 883177 AnAnonymous
AnAnonymous's picture

Same stuff as usual: this article is one sided to the conclusion the EU is going to implode.

Once again, taking the other outcome, the goal is to further the EU integration. And suddenly, the reading changes.

Where to drawn a line? By noting what moves are made after events, or a sequence of events.

So far, the moves were all made in favour of deepening the integration. Never to decrease the integration.

The Irish simply opened the door of integrated debt. They no longer distinguish their debts with EU debt.

What fruit will that tree bear? Hard to tell.

And why all this mismatched conclusion? Why people can not factor in developpments as they witnessed them?

Why people are not able to accept that so far, the slider is moved toward more integration?

 

Gang, gang, gang. If you understand gangs, you understand the US.

Just like gangsters, people do not oppose the EU, they oppose the EU for taking the same path as the US 200 years ago.

Mon, 01/17/2011 - 23:38 | 883319 Founders Keeper
Founders Keeper's picture

[Gang, gang, gang. If you understand gangs, you understand the US.

Just like gangsters, people do not oppose the EU, they oppose the EU for taking the same path as the US 200 years ago.]---AnAnonymous

Comparing European countries united under the EU to the states of the U.S. is like comparing apples to oranges.

The fundamental differences are innumerable. But, let's just take one: homogeneity. The culture within each euro country is a unique homogeneous group, i.e. Germans are German, Greeks are Greeks, and the French are...well...French. So, the euro zone is a collection of unique cultures. 

In the U.S., the culture is a mix in each state across all 50 states; whereby, Americans living in Texas are relatively the same as Americans living in Nevada, Oregon, and New York.

The notion that the EU and the USA are similar in design and in working order is astonishing. 

If you understand individuals, you understand the U.S.---not "gangs."

 

Tue, 01/18/2011 - 04:08 | 883564 AnAnonymous
AnAnonymous's picture

Sure, sure. Discarding quite easily the time reference.

Read again the FF, they reported the  same issue: knowingly, people of various origins and various loyalties, and of different concentration over the territory. They implemented a plan to merge all these people into one new people, the American US People.

This is exactly the same path the Europeans have been walking, they are on the verge on merging in the European People, an entity that does not exist yet.

So if you want to bring irreductible differences, tell about the time frame I underlined.

But in the doing, of course, it will grow obvious that the US is all about gangs and nothing about individuals.

Actually, individualism has decreased since the rise of the US.

Today, the individual is where all the multiple group memberships one person has to be refered are overlapsing.

An individual in the US framework is the list of all the groups a person belongs to: an individual is a that race person, that gender person, of that fancied nationality (something you should ponder in your propaganda spitting, how usual is it for a US citizen to depict oneself as Irish, Sweden, German etc?) within that age bracket, within that weight bracket, who served in the army or not, who was in high school a member of that group, who earns that bracket revenue, who live in that neighbourhood etc...

Everytime, a person is sent back to a group membership. A person in the US never exists as an individual, only through the multiple groups that person can be referenced to.

 

The US has killed the notion of individuality, only to substitute for it the superposition of all groups one can belong. That is why belonging to this or that group is all that matters in the US. US citizens do not want to be individuals, it is of no interest for them. They want to be a member of that or this group. The group is all in the US.

But that will be for another time, first, let see how the US 200 years ago were different from today's European situation. How it is comparing apples to oranges.

Let's get some fun.

Tue, 01/18/2011 - 03:44 | 883557 Bearster
Bearster's picture

+1 Founders

Let's not forget the lack of centuries of more or less constant warfare between the states of the US, based on implacable tribal hatreds.

Mon, 01/17/2011 - 23:48 | 883335 Korbin Dallas
Korbin Dallas's picture

Ugh, being compared to a New Yorkian put a progressively-taxing slant on your otherwise accurate statement.

That being said, one cannot deny the force of a long-term plan.  Face it or not, the United States of Europe has been in the works for decades by both hidden and visible forces.  Those deriding its unrepresentative and irresponsible form of dirigeiste form of parliament miss the point, in my humble opinion, that the European solution to selling the union is via stealth.  And that is the difference between living in America and Europe, we tend (especially in Texas) to lay it all out there and let the people choose.  What poisons our lucious soup are the dead hands, invisible hands, and sock-puppets.  Let Europe get gang-raped by their own dead hands, we have more to fear from the puppeteers and enablers.

 

Mon, 01/17/2011 - 22:19 | 883172 The Talmud Kid
The Talmud Kid's picture

Last one out of the euro is d'œufs pourris.

Mon, 01/17/2011 - 22:00 | 883120 Misean
Misean's picture

"Is Germany willing to be held hostage to foreign printing presses?

How will Germany publicly respond to this?"

Visions of Leopard II's warming their engines on the edge of the Ardennes just popped into my mind...

Mon, 01/17/2011 - 22:40 | 883216 Gunther
Gunther's picture

The German armed forces have only the task to stop the enemy until real military arrives.

Your vision is not grounded in today's reality.

Those few Germans who see what is going on buy gold and silver metal.

After holding it for more then a year gains are tax-free. :-)

 

Tue, 01/18/2011 - 14:54 | 884623 Commander Cody
Commander Cody's picture

After holding it for more then a year gains are tax-free. :-)

I think I'll start brushing up on my German.  Guten tag, Gunther.

Mon, 01/17/2011 - 22:12 | 883154 Terminus C
Terminus C's picture

Ireland is printing our money Hundinnen!

Schnell, invade Frankreich!

I can see it now...

Mon, 01/17/2011 - 22:22 | 883180 Misean
Misean's picture

It provides better access to the English Channel.

Mon, 01/17/2011 - 21:59 | 883117 THE DORK OF CORK
THE DORK OF CORK's picture

To hell with those Teutonic arseholes  - we bought their BMWs in the good times - now its payback time....... I hope......... I pray........... I beg........ subservience is such a bitch.

www.youtube.com/watch?v=Of8CCCTuqz8 

 

Mon, 01/17/2011 - 22:17 | 883166 Hulk
Hulk's picture

Hysterical Dork!

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