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Irish Nationwide Now Engaged In "Micro-Quantitative Easing" As It Issues Bonds To Itself To Repay Interest
A new report in the Irish Times discusses how Irish Nationwide, where incidentally sovereign CDS spreads just hit a fresh all time wide record north of 400 bps, discusses how the insolvent bank, in a supreme example of just how prevalent ponziness has become in the current Central Bank subsidized environment, is now issuing bonds... to itself. In a circular issuance scheme that would make the Greek finance minister blush with envy, "Irish Nationwide has issued €4 billion of Government-guaranteed bonds
effectively to itself. It can use the bonds to draw €4 billion in
funding from the European Central to help tide it over a key refinancing
period later this month." At its core, the scheme is nothing new, having been used repeatedly by Europe's most bankrupt countries, although the small scale in this case, and the blatant inability to even cover up the circularity has many worried that if the ECB needs to step in for such "modest" amounts to preserve bank solvency, it is all pretty much just a matter of time before it is game over for Ireland's banks. And elsewhere, confirming that defaults are imminent, the CFO of Anglo-Irish has just said it would be a disaster to default on its bonds. He is, of course, absolutely correct.
More from Irish Time:
The building society has €4 billion of debt covered under the original
blanket Government guarantee maturing at the end of this month. The
bonds will allow the building society to draw fresh funding from the ECB
if necessary to repay this debt against a backdrop of heightened
funding pressures across the guaranteed institutions.
A spokesman for the building society insisted Irish Nationwide had sufficient cash to repay €4 billion of guaranteed debt which must be repaid later this month.
He said the listing of the bonds was to “improve the liquidity of Irish Nationwide” ahead of the building society shrinking radically as a consequence of the transfer of €9 billion in loans – more than 80 per cent of its loan book – to the National Asset Management Agency and the receipt of Nama bonds to improve liquidity.
It is understood that Irish Nationwide will start drawing ECB funding using the bonds as short-term collateral this week and will refinance the debt with Nama bonds as they are issued before all loans are transferred by February.
For those seeking a good soundbite to summarize the ongoing sticksave attempts by the ECB in broke peripheral countries, here it is: "Micro.Quantitative.Easing"
One bond analyst said he had never seen a funding transaction structured in such a way, describing it as “a type of micro-quantitative easing” – a means of allowing a central bank to print money to support an institution.
“You could say it is innovative in some respects – it gets them through the September 2010 refinancing,” said the analyst.
A spokeswoman for the Central Bank said it did not comment on loan facilities given to institutions.
“Where an asset class is eligible for ECB borrowings, the Central Bank will provide funding on behalf of the Eurosystem, in accordance with the rules and procedures agreed by the Eurosystem,” she said.
h/t Ciaran
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It can use the bonds to draw €4 billion in funding from the European Central to help tide it over a key refinancing period later this month.
Borrowing to make debt payments? And the time window is next month? Lollercoaster.
Just when you start to think they may have found a way to print infinitely, with little or no damage to the financial system, it will all flash crash.
That's what I'm thinking also. The EU doesn't have the experience with monetization like old Ben does.
+1
The EU has problems with sovereignty, and countries attempting to re-assert sovereignty, while under the ambiguous restrictions of the ECB and the legally dubious claims by the IMF. They can't act unilaterally like can the FED, and they don't get the "benefit-of-the-doubt" because the Euro isn't the world reserve currency.
This will flash really fast: Game theory suggests the first ones out of the burning building have a chance at staying alive. All incentives are to "screw your neighbor to save yourself".
It's turtles all the way down.
We have truly crossed the threshold into the twilight zone.
The question is, when do they start using their credit cards to pay their debt?
Hey, none of you have ever used your mastercard to pay off your Visa before? haha!
There goes gold and silver...Gold at $1261...Silver crosses over $20
Not for long. They stepped on that real quick. It hit $1,262 just as you were posting at 8:25AM and pulled away like it just touched a hot stove, dropping $7 in 10 minutes.
You just know that JPM is stepping on Gold big time in a desperate attempt to convince people this will fail......again.
The biggies are massively short both metals. A take-down is coming...
Get ready to buy, buy, buy!
http://farm3.static.flickr.com/2078/2087901619_fcb959b8e8.jpg
....the exit doors are to your left.
They reported on BB radio that there was "stronger" demand than expected for Portugal's bond offering. The question is, was that demand the ECB and Fed? Oh and Poland "promised" to cut debt...like Greece et al. I would say Europe bought itself about 3 weeks of calm. "It's merley a flesh wound", yeah looks like Europe is the Black Knight.
Yea but did you see the return rate? 4-5%...they aren't going to be able to pay that off. This was a holding action, hoping that the world situation will approve.
hopeium...it's a helluva drug.
Desperation is more like it.
Ireland is goosed!
http://bit.ly/aT7bE9
It's not a potato famine, it's a banana famine
http://bit.ly/bEPcH6
At least the EU banks won't have to pay any tax.
I find myself thinking about the "good ole days", before the creation of central banks in 1740 when a silver was a silver and a gold was a gold.
Never should have let government change the names to dollars, pounds or euros- divorced from their original meaning and now, divorced from their original value.
The should just sell puts on their own stock, that would bring them loads of cash....
They would want to sell calls on , and buy puts on themselves. That way the calls expire worthless and the puts are worth 1000*pi^5. Then they could buy the US and grow potatoes everywhere.
I don't know - they might get a stern talking to from the financial oversight commission, and/or a $150,000 fine. And trust me - you do NOT want a stern talking to.
and don't forget the strongly worded email or two
And the commissioner might postpone your 3pm Sunday tee-off, and not buy the first round down the 19th hole.
The three stern words are: "Where's our cut?"
I think they need cash. What you suggest is like doing a rights issue, but without the cash..
Cash?!? Who needs that when I have my newly minted Visa issued by Anglo Irish Bank!
A Man without Q...: excellent idea ! Actually the largest buyer of Greek CDS "insurance" are Greek banks themselves...as far as I heard from source who do not want to be named...
And this is why these games only work for so long. The supposed lack of risk creates front running of epic propoprtion creating more risk, leaving the fundamental problems unchanged and passing around shells from A to B. All anyone needs to recall is that when passing shells nothing is being produced. The gain of one is the loss of another somewhere. By attempting to save the financial markets they have destroyed them.
Like chewing off your arm cause you're starving.
coyote ugly syndrome.
still luv that avatar, headbanger.
The lie gets bigger who will be the biggest poltroon of them all..kinda gives surreal a bad name.
The journey through the looking-glass continues....
<OT> I see the algo from yesterday has already started its churning of C today. I am a bit amazed no one has talked about how the pattern in the price of C was too obvious.</OT>
nothing will happen
anyone who effects a bankers bonus or confidence in the stock markets will just get bailed out. Default is not allowed
Think I,ll issue myself $1,000,000 today.You can,t make this stuff up.
This is evidence of the technical 'difficulties' and factors that I commented on most of the summer of 'recovery'.
There are huge amounts of 'perpetual' debt that both the corporate (financial) and governments need to 'roll over' starting in September and moving into October.
This 'rollover' of debt usually just causes some slowing in the velocity of money as most holders will just move 'up' and 'down' the yeild curve but will renew their holdings.
A lack of trust, no-return for risk environment causes the potential buyers to move to other, more creditworthy sellers ... causing all sorts of 'structural deficiencies and imbalances'.
The Central Banks can shell game this for a bit if the problems are isolated but if there's lots of little issues or a couple of big ones that are interconnected ... well, it all falls down.
It's gonna get tough for about 6 to 8 weeks or so.
We are in the twilight zone.
I'm sick of the orwellian newspeak used by the medias and the central banks.
"Refinancing": Emergency borrowing to pay back the debts and avoid immediate destruction of the international economy
"Quantitative easing": Theft of savers and citizens in order to keep the great Ponzi running
"An ECB spokeswoman refused to comment": the decorative chick of the ECB refused to publicly admit that the central banks were again screwing savers and citizens.
Wait a minute - there is a HUGE franchising opportunity for the U.S. Federal Reserve - Micro.Quantitative.Easing - The next stimulus package could allow US citizens to access a FED facility in the SAME fashion! Can't you SEE the infomercial - Ohhh ONLY if Billy Mays were still here (God Rest his Soul) - Billy Mays for the Federal Reserve - Is your House Underwater? Has your Health Care Premiums Skyrocketed - Well then you can call the Fed just like the Big Boys & get your own Micro.Quantitative.Easing facility - 10% GDP or your $$$$(LOLOL) back!
Tyler - I have read & re-read this article several times - I have taken 2x the Adderall to address ADD and I am still lost - please forgive a newbie - I owe interest on a loan - I write an IOU to myself, pledge it as collateral & receive money to make an interest payment - is that too simplistic?
You are correct -- your example is not too simplistic -- this is exactly what just happened.
Irish Nationwide issued an unsecured IOU to itself so it could claim it has more collateral to borrow more money from the European Central Bank.
The ECB won't be paid back, (Irish Nationwide will default), but the ECB doesn't care because it's trying to "quantitatively ease" -- print money -- and it actually doesn't care if its loans are never paid back. (In fact, the ECB comes out ahead if the loans aren't paid back, because the goal is to debase the Euro.)
You're reply illustrates why so many people think economics on a country or global scale is too difficult. The reason they think this way is because most of it "doesn't make sense" compared to how they live their lives.
In our "real" world, there are real life boundaries and severe consequences for violating them. We couldn't issue ourselves collateral (aka give ourselves a signature loan and then print the money to fund the loan) in order to pay the interest on the other loans we have.
Our banks keep us within sane boundaries that help prevent us from blowing ourselves up, mostly because the banks wish to be repaid. At least they wish to be repaid most of the time by most of us, excluding the 2004-2008 real estate market.
The world of fiat fractional reserve banking and printing presses just doesn't compute for average Joe.
+1
Hey, this is a great idea! Why doesn't the U. S. / Fed try this trick?
Oh, wait...
Nice article thanks.
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