This page has been archived and commenting is disabled.
Ireland the Dollar and Ben
Ireland is high on the list of, “Things that Could Go Wrong Big Time”.
The numbers are so scary that they are encouraging. Ireland is a TBTF.
If there were to be a problem it would cripple the rest of Europe’s
banks. Therefore they can’t let if go.
Robert Peston (BBC)
wrote a blog about his conversation with Irish finance minister Brian
Lenihan. He spells out the death grip of debt that Ireland is in. A
good read. Some cut and pastes:
Total foreign bank exposure to Ireland's economy is $844bn, or five times the value of Ireland's GDP or economic output.
BK: By way of comparison the CIA puts total external debt of
Germany at 1.5X’s GDP. The US is 1:1 Canada has a ratio of 0.7. And
Ireland is 5X’s? How did they get so deep into hock? (That same ratio
for Russia, India and Brazil: 0.4X, 0.2X and 0.2X respectively.
Ahem....)
German and UK banks are Ireland's biggest creditors, with €206bn and €224bn of exposure respectively.
BK: About $600b. Just the UK and Germany. What’s a good “haircut” estimate on this? My answer is it starts with 20% and could be as high as 30%. That would come to $150b. This would be a lights out event for the banks.
The Irish economy is hideously and perilously balanced between recovery and Armageddon.
Mr.
Lenihan didn't rule out in his interview with me that the Irish
government might eventually be obliged to ask for financial support from
the European Financial Stability Facility.
BK: When any Finance Minister says, “I wouldn’t rule that out”, he is really saying, “We are trying to kick the can down the road a bit longer, but really the lines have crossed and we are going to need help.”
The Ireland story has been popping up in the press and with folks who
trade CDS and Bund swaps of late. It has not hit the EURDLR. A few short
months ago if Ireland was in the spotlight as it is today the dollar
would have been soaring. Today it is ho hum. The reason for the change
in sentiment is Ben Bernanke and his obsession to devalue the currency.
The idea out tonight (From Ben to the WSJ) is that the Fed is planning
to buy $100b a month of Treasuries. For as long as Ben likes. We are
now completely without limits. What central bank or foreign investor
will willingly accept that policy? Why should they? They will vote with
their feet.
Europe is in deep trouble. America wants to destroy itself. America will
prevail in the race to the bottom thanks to the mindless persistence of
Bernanke. And in the process we will all lose. Things are getting
downright silly. The price of gold could too.
»
- advertisements -
It’s a interesting news,i like it.Additionally,wellcome to my website prettyboots.org ,here are so many UGGS On Sale such as:UGG Elsey wedge|UGG Elsey wedge black|UGG Elsey wedge chestnut|UGG Elsey wedge espresso|UGG Langley|UGG Langley black|UGG Langley chestnut|UGG Lo Pro Button|UGG Lo Pro Button black|UGG Lo Pro Button blue|UGG Lo Pro Button cream|UGG Mayfaire|UGG Mayfaire black|UGG Mayfaire chestnut|UGG Mayfaire chocolate|UGG Mayfaire sand|UGG Mayfaire red|UGG Nightfall|UGG Nightfall black|UGG Nightfall chestnut|UGG Nightfall chocolate|UGG Nightfall sand|UGG Sundance II|UGG Sundance II black|UGG Sundance II chestnut|UGG Sundance II chocolate|UGG Sundance II sand|UGG Ultimate Bind|UGG Ultimate Bind black|UGG Ultimate Bind chestnut|UGG Ultimate Bind chocolate|UGG Ultimate Bind sand|UGG Ultra Short|UGG Ultra Short chocolate|UGG Ultra Short sand|UGG Ultra Short black|UGG Ultra Tall|UGG Ultra Tall chestnut|UGG Ultra Tall sand|UGG Ultra Tall balck|UGG Ultra Tall chocolate|UGG Suede|UGG Suede black|UGG Suede chestnut|UGG Suede sand|UGG upside|UGG upside black|UGG upside chestnut|UGG upside mocha|UGG Roxy Tall|UGG Roxy Tall black|UGG Roxy Tall chestnut|UGG Roxy Tall chocolate|UGG Roxy Tall sand|UGG seline|UGG seline black|UGG seline chestnut|UGG Corinth Boots|UGG Liberty|UGG Liberty black|UGG Liberty cigar|UGG Highkoo|UGG Highkoo amber brown|UGG Highkoo espresso|UGG Highkoo grey|UGG Highkoo black|UGG Knightsbridge|UGG Knightsbridge black|UGG Knightsbridge chestnut|UGG Knightsbridge grey|UGG Knightsbridge sand|UGG Knightsbridge chocolate|UGG Adirondack|UGG Adirondack brown|UGG Adirondack chocolate|UGG Suburb Crochet|UGG Suburb Crochet black|UGG Suburb Crochet chestnut|UGG Suburb Crochet chocolate|UGG Suburb Crochet grey|UGG Suburb Crochet white|UGG Kensington|UGG Kensington black|UGG Kensington chestnut|UGG Roseberry|UGG Roseberry black|UGG Roseberry sand|UGG Gaviota|UGG Gaviota black|UGG Gaviota chestnut|UGG Gaviota chocolate|UGG Desoto|UGG Desoto black|UGG Desoto chestnut|UGG Desoto chocolate|UGG Brookfield Tall|UGG Brookfield Tall black|UGG Brookfield Tall chocolate|UGG Gissella|UGG Gissella black|UGG Gissella chestnut|UGG Gissella espresso|UGG Payton|UGG Payton black|UGG Payton chestnut|UGG Payton red|UGG Bailey Button Triplet|UGG Bailey Button Triplet black|UGG Bailey Button Triplet chestnut|UGG Bailey Button Triplet chocolate|UGG Bailey Button Triplet grey|UGG Bailey Button Triplet sand|There are so much style of cheap uggs for sale ,so once you go to my website you will be very surprise.
Man, the yield on the Irish 10y has gone parabolic in under a month.
http://www.bloomberg.com/apps/quote?ticker=GIGB10YR:IND&n=y
Yet another great post Bruce. Thanks!
Don't worry, France won't blow it!
http://www.bbc.co.uk/news/world-europe-11419212
Nice piece Bruce! Do you ever read Edward Hugh? This is pretty juicy stuff on the strain throughout Europe.
http://fistfulofeuros.net/afoe/and-then-there-were-none/
anyone else wonder that with all this talk on currency wars/devaluation/blah blah blah, why there has been scant attention being paid to the british pound?
dollar/euro/franc/yen/yuan/real ad infinitum, yet little to no recent focus on the crown currency of them all...
things that make you go hmmm
We have been the plaything of the friedmanites since 1987 - the socialists have been happy to feed off the surpluses created from extracting capital from various carcasses not unlike hyenas on the savannah
We may be a small country with no real control over the enormous sums of money in our jurisdiction but we may do Europe a favour by bringing this giant absurd white elephant down.
Haven't seen you for a while, Cork. I thought by now you would have the whole system shifted to a guinness standard. Works for me;)
I have been drinking litres of wine from my gourd a la Hilaire Belloc style - it will be tough to get back to a beverage with both eating and drinking in it - but one must always strive to be the best that you can be in your chosen hobby.
Welcome back
Thanks Bruce, but I would have prefered to stay in the Holodeck just a little bit longer and not reenter the so called real world.
The race to the bottom is in your trading accounts.
BERNANKULA
http://williambanzai7.blogspot.com/2010/09/bernankula.html
I'd say them pikies took ya fer a roid.
What is that painting? I like it.
It's called "Bush, Hank, and Phil Gramm In Flyover Country" by an avant garde artist named I.P. Freely.
School of Duchamp obviously.
No body mentions Phil Gramm's name enough as one of the culprits in this housing endgame bubble. Talk about escaping the scene of the crime!
What is the "takeaway" here??? With each passing year Mr. Krasting has more nightmares about whirlpools.
I can't think of a better way to describe what I see. We are going to get sucked down a hole. It will start slowly (it has started already). It will gather speed. There will come a time that the current is too strong and there is nothing we can do to escape the sucking noise. The end will be scary. Painful.
Sad that it is avoidable and that the Fed is encouraging it to happen.
I think we still have a while. These things take longer to play out than anyone would ever imagine.
I think it's fundamentally a demographic problem in the developed world that's being misdiagnosed and mistreated as a temporary liquidity issue.
The US is roughly a decade behind Japan. I think Japan lasts maybe 2 more years, so that puts the US about 2022 or thereabouts. That will be about the crest of the boomer retirements too.
Actually I meant that as light-hearted tease, but it's hard to communicate it online. I generally agree with inflation being a problem some years down the road. I think your view is much more pessimistic than mine, but I agree with a large part of what you are saying.
I'm still holding out some faith for Obama, and that after the election they will go to more targeted fiscal spending and away from QE which only benefits bank reserves and hedge funds. I know you are against both, but I think short-term targeted fiscal sending in growth/strategic industries could be helpful.
It's also my opinion ending tax cuts for the rich will be beneficial for the budget both short-term and long-term. I also imagine you disagree on that.
I like to "raz" you Bruce and give you a hard time, but I respect your thoughts on FX and I read your posts pretty regular.
*TRUE* DIVERSIFICATION = "EPIC WIN" FOR INVESTORS
Shawn Mesaros, Pamria, LLC
Ireland is paying about 6.25% on loans. Greece is paying >11% to keep afloat. How long can those last?
These external debt multiples don't really mean that much. All it means is that Ireland is a small country with some big banks. The "external debt" is just the liabilities side of the banks' balance sheets. This in turn means that Ireland's central government probably can't bail out said big banks. What this in turn means is that, if the banks get into trouble, they should be recapitalized via a debt/equity swap, the way things are supposed to be done, rather than stealing from the taxpayers.
They want the system to fail because the system would have failed anyway with no one to blame,so nothing better than to let the banks destroy it before people came to retirement,etc, before realising the cupboard was bare.At the moment the politicians can do whatever they want and blame it all on the banks instead of people understanding that none of their contributions was ever saved for them,huge debts run up with little return for the taxpayer and the politicians were to blame.The banks aren,t blameless but the politicians allowed them to do what they did.Regulation was non-existant.
Isn't this the medicine we were all being recommended? Less regulation? It came from all sides since reagan and thatcher. Now we reap the results. Anyway, banks have much more lobbying power (money) than the people. There was only ever going to be one winner.
Sit-rep from Ireland, where to start?
Housing,
Approx 25% drop in value, (those that are selling) long way to go but shored up by government tax breaks for the first 7 years interest on the mortgage. Lots of folks in arrears, government trying to stop repossesions. Thousands of new builds abandoned all over the country, (these are big numbers for Ireland) in fact out of my front window are 3 apartment blocks half finished slowly rotting. Developers are gone, bankrupt, loans taken on by the government (NAMA) who tell us they will make us a profit. I don't share their optimism nor their fancy ideas of aerodynamic swine.
Latest idea is to demolish most of the housing stock built in the last 5 years so supply dries up and prices will magically rise again. At least this may create some jobs in the bulldozing sector.
Jobs.
Unemployment figures are 13.7%, if you believe this then let me tell you the one about the hog with a jet pack. My own estimate would be closer to 20%. The government has a policy for back to education, the same as unemployment benefit but you get to study, takes you off the unemployed register, universities and colleges are bursting at the seams with mature students. Where we used to have 16 pages a week of jobs in our local paper, now we are lucky if there is one full page. The other forgotten (conveniently) factor is migration. Ireland has been a net importer of workers from eastern europe for some years, they built the houses and also rented them. maybe half have gone home since 2008 due to lack of construction jobs. it's like a snake eating it's tail. Many people have been forced into part time work and short hours. These are the silent problem.
Consumption.
Shops are closing daily, most have sales with prices falling across the board for consumer goods while food, fuel and the usual necessities sky rocket. Petrol (gas) is €1.30 a litre. I just did the conversion, I think that's $6.62 a US gallon. People are not spending and you can see it everywhere.
Government measures.
Austerity is the buzz word. Public sector cuts have been severe, everyone has had an extra 2% 'levy' taken from the weekly wage. Benefits have been cut, mainly ones aimed at children. Young unemployed get half the payment they used to, very harsh. More to come in the December budget. €3bn cuts minimum. for a population of 4 million these numbers are astounding. Tax take is plummeting due to less house sales and less workers while the expenditure is rising due to paying unemployment benefits etc.
Oh, and any bad loans, anywhere are being handed over for the taxpayer to deal with, now call me a cynic but why would you bother paying it back the minute it is guarenteed, estimates I have read point to a third of these loans 'not performing'.
Pensions.
Public sector pension liabilities are HUGE and nobody talks about this elephant in the room, but the dung is beginning to whiff and questions are bound to be asked soon. Private pensions for non-governmental workers are something we have to buy ourselves. Most treated their house as their pension, planning to downsize with those crazy ever rising prices or releasing equity. this could be a problem as most are now in negative territory. So, that's the ticking time bomb for another generation to worry about.
Banking.
Not much to say, technically insolvent, announcing profits by laying off workforce, not lending to small business etc, usual stuff. Anglo irish to be split in two. I would prefer it was Sean Fitzpatrick that got this treatment, (google him) but he is laughing all the way from the bank. People are angry, I'm angry. They were running these banks like casinos and were corrupt to the core in collusion with government.
Outlook.
IMF, pure and simple. We can't go on like this much longer. the downward spiral of austerity, more unemployed, more mortgage defaults, less spending etc. is just knocking down the house of cards. It's bleak here, people are ready to take to the streets, It's ok for America. ben just blows his bubbles and puts it off a while longer. We can't devalue as a euro member. Oh, that €1tn ECB rescue fund does not exist. It's just a confidence boost/trick for the markets. It's just an agreement the other members will chip in if one gets in trouble. There is no actual money down. My belief in this fund is equal to my belief in gravity defying pork. With Greece, Belgium, Portugal and Spain with similar problems it's only a matter of time before Germany and France pull the plug on this.
Bleak, dire, depressing, anger building. Ireland is on a hair trigger folks.
Disclaimer. This is all my own outlook. The government and the banks would put it another way and they must be right huh? After all, they saw it coming, who better to get us out of the mess than those that put us in it?
Interesting piece about the european 'rescue' fund.
http://ftalphaville.ft.com/blog/2010/09/27/353176/europes-spv-really-is-...
Cheers
Szjon
Nice summary. Thanks.
Forgot to mention, the sales in stores are so bad that they have the christmas trees and decorations out for sale already. This is desperation. I think the christmas sales figures will be the end of the charade of 'recovery'.
Can we really believe that our current predicament was accidental? That the global bankers just "made mistakes"? NO. NO WAY.
They want the system to fail. And that is why they are running stocks and "risk assets" now - in order to crash them again.
Hey instead of paying capital gains tax on gold, our only Constititional money, why aren't we getting a tax deduction on a depreciating Federal Reserve Note?
Explore the common law and constitutional concepts of just compensation for "diminished value" and you might have a number you can invoice to a responsible bank in your Federal District.
Ireland won't be able to pay back helicopter ben, as the diagram depicts, so ben and his merry gang of banksters will demand what it wants of Ireland.
Which German and UK banks have the exposure? That would be very interesting to know.
+1, and please not just the numbers but a source...
It's difficult to find stuff broken down by individual foreign bank, but here's the data on Éire from the BIS and IMF.
http://bit.ly/aX8PqQ
http://bit.ly/cbSsQ9
you have no idea of what you are saying. Go and check why it has not hit the eurodollar rate yet. There lies your answer you nitwit. And here is a hint: China.
Does anyone have a good source for those numbers mentioned above, the USD 600bn Germany and France own in Irish debt?
Thanks!
Ever notice that Ireland and Iceland differ only by one letter?
Actually, the difference is that Ireland is enormous compared to Iceland. Six million to a few hundred thousand. Ireland was a seemingly substantial enough economy to attract much bigger sums of money, and not just into its banks, also into its businesses and property.
But compared to the money that foreigners poured into it, Ireland is puny. Foreign banks blew a much bigger bubble in Ireland than the Swedish banks blew in the Baltics. Ireland probably won't even be able to bail out depositors in its banks without EU aid. The losses on foreign banks' lending to Irish banks, businesses and property developers are going to make all that EU lending to Central and Eastern Europe look like a good investment.
Irelands population (the republic of) is around 4.3m. Northern Ireland would take it to 6.2m but economically we are miles apart. Republic = euro, north = British pounds.
Ireland is simply the current locus of the unravelling of the fiat Ponzi scheme. Before that it was Greece. Spain and Portugal also exhibited signs of terminal instability, but crisis fatigue set in, sending the focus elsewhere and belaying judgement. Financial instability is now traversing the financial system randomly. Bermonkey's printing of more claims against a static base of assets is exactly the wrong thing to be doing. It is power pumping gasoline on a fire. You couldn't do more to destroy the financial system if you tried. All the electrons in the world won't make the toxic assets eating the money center banks from the inside perform.
Ambrose Evans-Pritchard has changed his tune.
Gold, bitchez!http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007777/sh...
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007777/sh...
Absolutely great read!!
Could not believe I was reading this a moment ago too...I knew it must be on ZH somewhere too!! The bit of the link you can't see says:
shut-down-the-fed-part-ii/
"I apologise to readers around the world for having defended the emergency stimulus policies of the US Federal Reserve, and for arguing like an imbecile naif that the Fed would not succumb to drug addiction, political abuse, and mad intoxicated debauchery, once it began taking its first shots of quantitative easing.
My pathetic assumption was that Ben Bernanke would deploy further QE only to stave off DEFLATION, not to create INFLATION. If the Federal Open Market Committee cannot see the difference, God help America"
:)
Bernanke has aaaallways had a target inflation rate that he would relentlessly persue.
3-5% or die.
Are the Chinese right? Are the Americans and the British now so decadent that they will refuse to take their punishment, opting to default on their debts by stealth?
God, what strange days, when a totalitarian regime justifiably condemns the decadence of Western democracies.
And the American economy is in worse shape than Brazil's.
Not for long. The front runner in the Brazilian Presidential election is a Marxist guerrilla member (reformed ;-) ). I truly expect a Venezuela scenario in Brazil.
First time in his life, Evans has written something sensible. In dumbness factor, he is second only to BoE.
Evans is a complete and accomplished nut who tries to write dramatic and somehow meshes it all up. He was all gungho on Pound then the dollar and even the US economy giving me the impression whether he was the runway correspondent from white house.
Which writer do you prefer instead?