# What happens to our deposits if IMF step in?



## galleryman (27 Sep 2010)

I would like to know what happens to the "Government Guarantees" if the IMF come in.  

I have all of my money from my house sale in deposits in Irl.  I do not have more than 100k in any institution so that supposedly ALL money in guaranteed by the state. 

Is that guarantee going to be honoured if Ireland is declared bankrupt by the rest of the world?

Can the IMF say to all deposit holders in Ireland, "Sorry but the money isn't there and you now all only have 20% of what you deposited"?


----------



## penguin (28 Sep 2010)

the problem I can see with this question is ,
nobody knows for sure .
Therefore it is just educated  guess work as to what will /could happen.


----------



## lightswitch (28 Sep 2010)

"the problem I can see with this question is ,
nobody knows for sure .
Therefore it is just educated guess work as to what will /could happen."

What has happend in countrys where the IMF have previously stepped in?

If you did believe that the IMF were taking over in the next few days, what would you do now to secure your money etc?  

I think this is what OP was asking...........


----------



## aristotle (28 Sep 2010)

lightswitch said:


> "the problem I can see with this question is ,
> nobody knows for sure .
> Therefore it is just educated guess work as to what will /could happen."
> 
> ...


 
Your money is secure if the IMF come in. The IMF lend money and of course there will be consequences to the public finances but they dont raid peoples deposits.


----------



## penguin (28 Sep 2010)

"What has happend in countrys where the IMF have previously stepped in?"

"The IMF lend money and of course there will be consequences to the public finances but they dont raid peoples deposits. "

Genuine question .

Have the IMF previous actions in other countries forced a Goverment to use depositors money to pay off loans?


----------



## z107 (28 Sep 2010)

Ask yourself this question.
 - Where will the money come from to honour the guarantee?

If you're happy with your answer, then you've nothing to worry about. Otherwise consider spreading the risk outside of Ireland.


----------



## aristotle (28 Sep 2010)

penguin said:


> Have the IMF previous actions in other countries forced a Goverment to use depositors money to pay off loans?


 
No, never happened. But you'll pay via taxes.


----------



## penguin (28 Sep 2010)

umop3p!sdn said:


> Ask yourself this question.
> - Where will the money come from to honour the guarantee?
> 
> If you're happy with your answer, then you've nothing to worry about. Otherwise consider spreading the risk outside of Ireland.


 
Happy is not a word being used too much lately with regards to any of this.


----------



## galleryman (28 Sep 2010)

thanks for the replies. 

I just wasn't sure if the IMP had similar powers to say an Administrator sent in to take over a financially troubled company etc.


----------



## shnaek (28 Sep 2010)

Micheal Martin has ruled the possibility out:

[broken link removed]

So it's definitely not going to happen then.


----------



## Marietta (11 Oct 2010)

shnaek said:


> Micheal Martin has ruled the possibility out:
> 
> [broken link removed]
> 
> So it's definitely not going to happen then.


 



Mr Martin insisted: "the Government has a clear pathway out of that".


So what is it Martin


----------



## Chris (12 Oct 2010)

As the saying goes: "Don't believe anything until it has been officially denied."


----------



## cremeegg (13 Oct 2010)

As I understand it during Argentinas default, accounts were temporarily blocked. The currency was devalued before they were unblocked. 

As Ireland is in the Euro the currency couldn't be devalued? Though the Argentines thought their Peso was linked to the dollar.


----------



## mmclo (13 Oct 2010)

cremeegg said:


> As I understand it during Argentinas default, accounts were temporarily blocked. The currency was devalued before they were unblocked.
> 
> As Ireland is in the Euro the currency couldn't be devalued? Though the Argentines thought their Peso was linked to the dollar.


 
+1 

We're not "linked" to the euro we are part of it. Argentina did pull a fast one effectively refusing to honour the pegging of it's Peso to the Dollar. However we are not in the same position as the dollar in that example is actually our currency

Also the IMFdon't "come in". There is a fund established by the IM and Eu that the country can borrow from if nobody else will lend. there are conditions attached to this but no deposits ahve been raided in Greece

Of course the Gauruntee is another matter, as previous posters say regardless of political promises where would the Govt. get the money to honour deposits??


----------



## cremeegg (13 Oct 2010)

To reply to mmclo above. How is the guarantee another matter, surely it is exactly the same matter. Of course the euro is our currency, but your Euros in the bank are only worth what the the bank or failing that the Govt can pay out.

At present the banks on their own could not honour the deposits. (B of I possibly could but if AIB went down B of I would be swept away also).

In the event of the Irish government becoming unable to meet its obligations as they fall due, and currently financial markets are charging a premium on Irish govt bonds because they fear this might happen, what are your chances. 

Ah yes the IMF EU bail out fund. 

The reality is that €750bn (not fully funded) the takes care of Greece, and Ireland too if we are next no problem, our absolute numbers are small in the European context. But the present bail out fund could not bail out Spain or Italy if that became necessary. These are not likely to go unless things get worse but that is a possibility.

More likely is that Portugal will turn to the fund. That might be OK Portugal is small too.  By then the markets will be so nervous that the German interest rates will begin to rise, and their voters will become reluctant to support more countries.

The Irish Govt currently has an income of €30bn per year and is spending €50bn. That cannot continue. [And should not but that is a different issue.] If an individual had an income of €30k and was spending €50k their bank manager would laugh at talk of cutting expenditure by €4k 

I dont think it unduly alarmist to ask what happens if the bail out fund cannot or will not ride to the rescue.

Ireland would be forced out of the Euro and teachers salaries and bank deposits would be repaid in NIPs (new Irish punts). And before anyone points out that there is no legal mechanism for a country to be forced out of the Euro please consider force majeure


----------



## jpd (13 Oct 2010)

Ha Ha ! 

But what is planned is a reduction of the deficit of 4bn in 2011, another 4bn in 2012, another  4bn in 2013 and another 4bn 2014 so that by 2014 we will be spending what we are earning more or less ie deficit will fall from 50- 32 = 18bn to 2bn 

Not sure that this has seeped into everyone's conscience yet - it will be a tough 4 years.


----------



## Ask the dog (13 Oct 2010)

I do not think that the government can cut the deficit by 16bn in 4 years ? 

Just for 2011 they have to cut public service wages, social welfare payments and raise taxes to achieve just 4bn saving.

I cannot see how they are going to do this for 4 years in a row without causing anarchy. There will be general elections every year or so as each sucessive government fails to get support for these budget cuts.

Eventually the IMF will have to set the agenda and run the country.


----------



## mmclo (14 Oct 2010)

Yes I don't necessarily disagree with ceremegg . I suppose whether we would be "booted out" of the Euro is as much a political question and I would say the Germans have sunk too much into the project to walk away and such a break up would destabilise many european economies which are recovering.

Agreed the ECF probably couldn't cover Spain, not sure what their figures are. Maybe that's an argument in favour of getting in there early at 5% as the hardship is coming anyway!

I say it's a seperate matter as I think it's mainly related to the public finances and the bond markets. Or to be more accuratre the bank gauruntee was a fraud from day one as the Governemnt could never honour it, making most discussion of it fairly irrelevant. So it's a confidence trick but then in many respects so too is the entire banking concept.


----------



## Expat64 (14 Oct 2010)

The Eurozone will do everything it possibly can to keep Ireland in the Euro. If so, deposits will most likely be subject to daily withdrawal limits for some time - most likely quite low!


----------



## Godfather (24 Oct 2010)

I think wiki is very clear under the "Criticism from free-market advocates" section:
http://en.wikipedia.org/wiki/International_Monetary_Fund

...The IMF is monetarist so it prioritizes the money versus the social welfare... 

What I don't understand is: why was Argentina then allowed to default without paying their creditors?

...And most of all: why did US let Lehmann Brothers go bankrupt?

At the end of the day it's the strongest who always wins and goodbye to the poorer people that dont diversify their savings...


----------



## sunrock (24 Oct 2010)

Just doing a bit of thinking out loud.
4 billion a year cut for 4years to get the deficit under control.
Thats 4,000 million cuts a year for our population of 4 million.
Thats 1000e cut for every man woman and child in the country.
The fourth year will see an average cut of 4000e for every person in the country.Thats a 16,000e yearly average cut for a family of 4 or a 80e per week cut for the average person.This would bring us close to only spending what we take in in taxes.
Unemployment will rise as there is less spending power in the economy and of course the dole will be much reduced.The extra "mortgage" for servicing the bank bailouts is not included in the above figures.Also we must pay back  the debt that we already  owe + interest.
It is clearly going to be really tough times ahead but as Garret Fitzgerald once said..."being poor doesn`t mean you can`t enjoy yourself"....He obviously was never in a pub or even a brothel with no money.
Property and buisnesses prices will plummet in value and will be bought up cheaply by foreigners. Also the government will sell off everything they can...I mean they own a lot of forestry and colleges and so on.
Ther will be a certain amount of inflation which will ease the pain.


----------



## skrooge (25 Oct 2010)

To sum it up the way I see it.  The administrator analogy isn't a bad one  but lets keep in mind what the IMF would be here to do - Get us to a position of long-terms sustainable financing.  So while on one hand they might slash and burn our expenditure (public pay & social welfare) and equally set about raising more money through higher taxes what would be the long term benefit of defaulting on deposits in our banks.  You'd end up with even more of a zombie banking system with people forever remembering "the day the IMF stole our deposits".

I know that the psotion between government and banks has been blurred but the focus of the IMF would be day to day expenditure of the governemnt not really the bank bail out. besides the IMF would still have to respect the laws of the landand the right I have to access my money.



cremeegg said:


> As I understand it during Argentinas default, accounts were temporarily blocked. The currency was devalued before they were unblocked. .


 
Accounts weren't blocked rather a bank holiday was extended to allow the markets to open and adjust to the new FX rate.  The reason why the bank holiday was extended was to stop a bank run.  Use the same logic here and the IMF would want to preserve the deposit base.


----------



## ibaraki (25 Oct 2010)

Originally Posted by *cremeegg* http://www.askaboutmoney.com/showthread.php?p=1092644#post1092644 
_As I understand it during Argentinas default, accounts were temporarily blocked. The currency was devalued before they were unblocked. ._

_And if I remember correctly, the Argentinian government then capped the amount the public could withdraw from their own accounts - I think the figure was $200/day. _

_The following book is a good account of what happened when the IMF entered Argentina: 'And the money kept rolling in and out' - Paul Blustein_


----------



## Godfather (25 Oct 2010)

Interesting! I'm wondering if the same will happen if all the countries belonging to the PIIGS acronym will have to pull off from the Euro!


----------



## Chris (26 Oct 2010)

sunrock said:


> This would bring us close to only spending what we take in in taxes.
> Unemployment will rise as there is less spending power in the economy and ...



This isn't correct. The government has to take money out of the economy in order to spend it. Cutting government spending will have a positive effect on the economy, but increased taxation will have a negative one. Unfortunately Ireland is so broke that tax increases will be inevitable, even though they will make things worse.


----------



## diablo73 (9 Nov 2010)

Why don't depositors move savings to Rabo which is covered by the Dutch Guarantee. It might not keep it away from the prying fingers of the IMF but a Dutch guarantee is worth more than an Irish one.


----------



## monagt (9 Nov 2010)

Does Rabo come under the Irish Gov guarantee? 

My question really is: 
In the event of IMF coming in and withdrawal limits placed by the Gov through not being able to honour the Guarantee in Full and Immediately, 
would the withdrawal limits apply to Rabo and/or Ulster Bank Republic and/or Ulster Bank NI?

I am afraid that we will get our guaranteed deposits back EVENTUALLY but only allowed to withdraw over say 10/12 years, getting 1% interest (less DIRT, levies and new prsi tax) and inflation running at 4 or 5% p/a


----------



## DB74 (9 Nov 2010)

skrooge said:


> Accounts weren't blocked rather a bank holiday was extended to allow the markets to open and adjust to the new FX rate.


 
An extra bank holiday - not all bad news then!


----------



## eimearnid (9 Nov 2010)

what about pensions taken out with the banks, in the event of a default and banks (BOI/AIB) failing? Would the pension be worthless as the investments are not guaranteed in any shape or form? Or are the banks in this case just the agent for the pension and the investment continues?


----------

