In a week that Irish sovereign debt has hit a record breaking 9.4% and 5 year credit default swaps hit an implicit default probability of 90% (from very low probabilities just a few years ago), I think it is important to look what could happen in a worst case scenario.
David McWilliams believes that there are strong parallels between what happened in Argentina and here. Obviously, all Argentinian deposits where wiped out when Argentina defaulted.
David McWilliams presents his thoughts here: [broken link removed]
Is David correct in his assertions? or is he overstating the risk of an Argentinian style sequence of events here?
David McWilliams believes that there are strong parallels between what happened in Argentina and here. Obviously, all Argentinian deposits where wiped out when Argentina defaulted.
David McWilliams presents his thoughts here: [broken link removed]
In Latin America, just before a bankrupt state entirely runs out of money, it is traditional to try one last smashand- grab for the savings of the private citizen. We have seen this trend not just in South America’s recent financial history but down through the ages.
Could it happen here? Could the savings of the private citizen be expropriated by the State to pay the last of the Croke Park promises? Or worse, could the remaining wealth of the private citizens be used to pay the odious debt of the banks? The answer is yes, and you have to be aware of this because this is often the way things end when a state goes bust.
When the likes of Argentina ran out of options, it swiped its people’s savings in various elaborate stitch-ups. We may be going down the same route. In Argentina this led a friend of mine to describe Argentinian compatriots as “great patriots and terrible citizens”. When they play football they are the most passionate supporters but ask them to keep their money at home and they will laugh, citing the last time patriotism was used to rob them. No gracias, amigo. Could it happen here? Cinnte!
Is David correct in his assertions? or is he overstating the risk of an Argentinian style sequence of events here?